A mixed reaction to Budget 2016 is evident today as personal tax marginal rates reduced to below 50% and the minimum wage is increased.
The debate into the 2016 Budget is well underway in political and economic circles after considerable anticipation and discussion.
In its pre-Election Budget, the Government has introduced some notable saving for families, such as free GP care being extended to under 12s, an increase in child benefit and free pre-school childcare.
The entry point at which workers must pay the universal social charge (USC), and reductions have been announced for some USC rates.
The rate of USC previously set at 3.5% has been cut to 3%, and the previous 7% rate has fallen to 5.5%.
Among the new pro-jobs taxation measures announced are reduced capital gains tax rate of 20% for successful entrepreneurs, reductions in the USC affecting middle-income workers and creating jobs
An income tax credit of €550 for self-employed people has been introduced, as well promises of further benefits for those who are self-employed over the coming years.
It was also announced that Ireland will have the world’s first OECD-compliant Knowledge Development Box (KDB) – a new enhancement to Ireland’s tax offering that the Government hopes will encourage innovation and research into Ireland.
Following recommendations of the Low Pay Commission, it has been announced that the national minimum wage has been increased to €9.15 per hour in a move that will benefit more than 120,000 people.
A PRSI relief of a maximum of €12 per week has been announced, commencing at income of €352.01 and tapering out fully at €424.
Over 60,000 gross new jobs will be supported by the capital budget of the Department of Jobs, Enterprise and Innovation next year, with measures including the continued rollout of eight regional jobs plans backed by €250m in capital investment.
These measures form part of an overall capital envelope of €3bn secured by Minister Bruton for his Department and its Agencies as part of the capital plan announced recently. Minister Bruton said: “This is a great budget for jobs. A series of tax changes that I have argued for, which will make a real improvement for start-ups and growing businesses, will be implemented. These include cuts to the USC for middle-income earners, changes in tax treatment for the self-employed, reduced capital gains tax for business and a new best-in-class Knowledge Development Box will encourage more people to start a business and help businesses to create more jobs. The continued protection of my Department’s capital budget over the crisis years means we can invest in new supports for job-creating businesses.”
A MISSED OPPORTUNITY
Dublin Chamber of Commerce has given a cautious welcome to measures announced in Budget 2016 to help entrepreneurs.
The Chamber said that cutting the capital gains tax (CGT) rate to 20% for entrepreneurs selling shares in their companies, up to a limit of €1m, is a step in the right direction and will encourage more investors to back early-stage companies.
Gina Quin, CEO, Dublin Chamber, said: “Starting or growing a young company is risky. Yet younger firms are the largest contributors of new jobs due to the inverse relationship between growth and size, according to the Central Bank. Ireland’s tax policy needs to support people who want to take the risk on real job creating investments. I hoped that Budget 2016 would throw open the door to entrepreneurs with an appealing tax regime for start-ups and small firms. The changes announced in Budget 2016 have opened the door, but only by a crack.”
The Chamber said that in comparing the relevant entrepreneurial tax policies of Ireland and UK that Ireland needs an flagship policy for indigenous business, which will be the small business equivalent of the 12.5% corporate tax rate. [
Quin said: “The UK has stolen a march on Ireland in recent years with a number of pro-entrepreneur policies. The result is that cities such as London, Manchester and Belfast can be seen as more attractive places to start and scale a business. Ireland has an opportunity to become the best country in the world in which to start and grow a company.”
Further criticism came from Threshold, the national housing charity.
Senator Aideen Hayden, chair of Threshold has strongly criticised this year’s budget for failing to introduce rent certainty measures to help address the current homelessness crisis.
“Today’s budget did not contain promised housing measures that Threshold had called for in its pre-budget submission. We welcome the increased funding for homeless services. However, the Government’s priority should be preventing families from becoming homeless in the first place. It is deeply frustrating for frontline services like Threshold to see families falling into homelessness when it can be prevented.
“This budget is a missed opportunity for low-income tenants. A minimum wage increase of 50c an hour will have little effect on renters facing monthly rent increases of up to €200 to €300. It is vital that the Government introduces rent certainty measures sooner rather than later in order to make a real difference to the lives of families facing the prospect of homelessness.,” concluded Aideen.