Introduction by Lorraine Griffin, Head of Tax
For our full, in-depth analysis visit our Budget 2016 page.
Against a backdrop of a modestly slowing global economy and IMF warnings around global economic growth, but with continued, reasonable growth in Ireland’s main trading partners and Irish GDP growth of 6.2%, the Government have set the stage for their re-election campaign with an expansionary Budget.
Budget 2016 announced a number of positive developments of relevance to the indigenous business community in Ireland, multinational companies operating here and individuals. These include the Knowledge Development Box (KDB), some CAT relief and reductions in USC rates. The Earned Income Credit (EIC) of €550 for self-employed individuals and lower rate of CGT on the sale of a business are welcome, but not sufficient to provide fairness or equity to entrepreneurs. And while the reduction in the marginal rate for incomes under €70,044 to 49.5% due to the USC changes is beneficial, it does nothing to address the burden on people earning more than this who pay onerous tax rates of up to 55%, or to make Ireland more attractive to Irish emigrants and footloose international talent.
Deloitte has called on the Government, through our submission on Tax and Entrepreneurship, for well-considered policy choices. This is necessitated by the ease with which labour and capital can move around the world today – and especially within the EU – and other countries’ efforts to woo entrepreneurs, which mean that Ireland is in an increasingly competitive environment for attracting entrepreneurs and the jobs they create for Irish workers. Of the options available to the Government to stimulate entrepreneurship, the Government chose to lower the CGT rate (20% compared to 33%) that will apply to gains realised on the disposal of a business (up to a maximum chargeable gain of €1 million). We look forward to seeing the fine details in the Finance Bill, and though we feel more could have been done in this regard, Minister Noonan indicated that more would be done in the future.
Whether the Government’s efforts to increase housing in response to the housing shortage will be sufficient to address it remains to be seen, but progress on this file is urgently needed, not only for the economy but also for the many homeless, renters, property investors, downsizers and first-time buyers clamouring for a properly functioning housing market.
The Government included in its Summary of 2016 Budget Measures an additional €75 million in revenue due to increased audit and investigation activities. It appears therefore that taxpayers may expect to see an increase in Revenue audits and possibly additional compliance costs.
We look forward to seeing more detail about the Budget measures in the upcoming Finance Bill and hope to see further progress in future Governments’ Budgets in improving the climate for entrepreneurship in Ireland.
In the meantime, I would encourage you to read our Budget summary and discuss with your Deloitte contact or any member of the team.
Head of Tax