Press releases

Wage subsidy extension, tax measures welcomed by Deloitte – capital gains tax opportunity missed?

"The government’s commitment to do more, if needed, as a positive approach."

The measures introduced in the July stimulus package have been strongly welcomed by Padraig Cronin, Lead Partner, Family Business & Tax, Deloitte, who noted the government’s commitment to do more, if needed, as a positive approach. The package has a good mix between grants, loans and tax rebates, according to Cronin.

The extension of the wage subsidy will support the continued operations of many more businesses - in the hospitality, food service and retail sectors in particular - into April 2021, 

said Cronin.

In the absence of a vaccine, more support will be needed at that time to maintain the productive capacity of the viable businesses in these sectors.

Capital Gains Tax

A number of viable businesses will also require equity investment to ensure they can “outlive the pandemic, he continued. To encourage such risk investment in 2020 and 2021, a special zero or low rate of capital gains tax could have been introduced. We would hope that this is looked at again in October.

Consumer Confidence

The package does a lot to address this final piece in the jigsaw. With consumer confidence holding steady into July, as evidenced in Deloitte’s most recent State of the Consumer tracker report*, the reduction in the standard VAT rate from 23% to 21% should encourage spending in the retail and hospitality sectors in particular. The hospitality sector will also benefit from the Stay and Spend tax rebate that will apply in the off-season.

For first-time buyers, the increase in the tax rebate on a new home purchase from €20,000 to €30,000 will be a welcome support.

Cronin also warned:
While 48% of consumers in Ireland remain worried about their physical wellbeing*, businesses and public services will need continued focus and oversight on providing safe environments to underpin consumer confidence as we progress to the next stage of re-opening the country.

 

Tax credit required to underpin Safe environments

There are significant costs being incurred by all businesses to endeavour to ensure a safe workplace and leisure environment,” said Cronin. “At a practical level these include reducing capacity on site, temperature checking, personal protective equipment (PPE), automatic doors to minimise surface touching, regular deep cleaning etc. In the October budget a tax credit should be introduced to reduce the cost of these measures.

Reskilling investment critical

Finally the €200 million investment in training/reskilling is welcomed. This should be seen as a first step given the societal changes underway. As a result of COVID-19 there have been permanent shifts in ways of working and consumer behaviour with the result that there is an acceleration of Digitalisation, remote working etc. Unless further and sustained investment in reskilling is made, in a few years’ time our unemployment rate will remain higher than it should resulting in an ongoing cost to the State and also the adverse societal impacts that unemployment brings to the fore.

Based on client feedback Deloitte reserves judgement on the likely success of the Loan guarantee scheme, as currently constructed, as to whether it will fulfil the objective of speedy deployment of low-cost finance to viable businesses.

Ends

Issued by Murray on behalf of Deloitte Ireland

For Further Information Please Contact

Orna Clarke
Murray 
01 498 0300
087 677 0360
oclarke@murraygroup.ie

Fiona MacCarthy
Deloitte
086 825 0027
fmaccarthy@deloitte.ie

About the State of the Consumer Tracker

This bi-weekly study is fielded using an online panel where consumers 18 years of age and older are invited to complete the survey (translated into local languages) via email. It is fielded in 18 countries (targeting 1,000 respondents per country/wave). The survey field period was 7-11 July, 2020.

About Deloitte

At Deloitte, we make an impact that matters for our clients, our people, our profession, and in the wider society by delivering the solutions and insights they need to address their most complex business challenges.

As the largest global professional services and consulting network, with over 312,000 professionals in more than 150 countries, we bring world-class capabilities and high-quality services to our clients.

In Ireland, Deloitte has approximately 3,000 people providing audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. Our people have the leadership capabilities, experience and insight to collaborate with clients so they can move forward with confidence.

In this press release references to Deloitte are references to Deloitte Ireland LLP. The information contained in this press release is correct at the time of going to press. Deloitte Ireland LLP is the Ireland affiliate of Deloitte NSE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”). DTTL and each of its member firms are legally separate and independent entities. DTTL and Deloitte NSE LLP do not provide services to clients. Please see www.deloitte.com/about to learn more about our global network of member firms.

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