Belfast Telegraph

Reflections on the Irish Budget

Clare M. Fitzgerald
By:
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The Irish Finance Minister, Paschal Donohue, delivered his Budget last month, and with many Northern Irish businesses operating across the Island of Ireland, there are changes that will have an impact on businesses here.
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Like many countries, the Irish government has incurred significant costs as a result of Covid supports paid out since the beginning of the pandemic. This, paired with the pressures with a rising cost of living, a continuing housing crisis, and a need for action on climate change, forced the Finance Minister to focus the budget on these areas to restore public services, the living standard and repair the public finances.

One of the main changes in this budget for businesses, will be the rise in Corporation Tax rates from 12.5% to 15% for companies with revenues of greater than €750m. While the rise is an additional tax burden for companies, the measure is a direct response to calls from the Organisation for Economic Co-operation and Development for international tax reform but, despite this increase, Ireland remains one of the lowest tax regions in the world.

Here, this raises the question of the stalled changes to the NI Corporation Tax rate and the tax gap that will arise for local businesses competitiveness when the UK rate increases to 25% from April 2023. Other significant announcements included the five-year extension of Corporation Tax relief for some start-up companies and the three-year extension of the Employment Investment Incentive Scheme.

To combat the rising costs of living, the minister announced the increases to the minimum wage to €10.50 per hour. Other changes include the standard rate band for taxation of almost €1,500, the ceiling for the second USC rate band from €20,687 to €21,295 and the personal tax credit, employee tax credit and earned income credit of €50. These changes will go some way to increase disposable income for individuals and households, however, there are criticisms that the measures are not enough to combat rising costs. The Minister has responded that the budget will bring down the cost of living “in the round” but “not everything could be done this year”.

The Employment Wage Subsidy Scheme (EWSS) for businesses affected by the Covid-19 crisis will be extended to the end of April, however the relief will be tapered from December onwards.

To help tackle the lack of housing the Minister has extended the government help-to-buy scheme, introduced a zoned land tax to encourage the building of homes and extended the pre-letting relief for landlords for a further three years, encouraging landlords to return vacant properties to market.

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It is no surprise that climate change was also high on the agenda, as pressure mounts on global leaders to react. The Minister has announced an increase in a carbon tax of €7.50 per tonne on CO2 fossil fuels, an increase to vehicle registration tax and an extension to the relief for battery electric vehicles, all aimed at encouraging drivers to purchase lower CO2 emissions cars.

Finally, to help with the hospitality sector, the minister has extended the reduced 9% VAT rate until late next Summer.