The 2018 Budget was introduced by Minister for Finance & Public Expenditure and Reform, Paschal Donohoe on 10th October 2017.
The Budget was presented against a background of continuing economic growth and an economy which is approaching full employment. The Budget is almost a balanced one, which means that our national debt may finally have peaked, though remains at a still massive €200bn. If international interest rates increase, as will almost certainly occur, then our balanced budgets will be in jeopardy. Similarly, any downturn in economic activity will hit tax revenues.
Government expenditure is much harder to reduce, as we saw following the recent economic collapse. However, the Minister appears to be confident that this situation will not arise in the coming years, stating as he did that budgetary expenditure for future years will be linked to growth in the economy. He expressed confidence that the economy will continue to grow for the foreseeable future, though he did caution about the uncertainty arising from Brexit, US tax policy and other World events outside our control.
As for specifics, the most note-worthy change for commercial property owners will be the trebling of stamp duty with effect from midnight tonight, from 2% to 6%.
The introduction of a new share based incentive scheme (KEEP) will facilitate the taxation of share disposals at the CGT rate rather than the income tax rate (now 48.75% on incomes up to €75,000).
For income tax-payers in general, the increase in the standard rate threshold for an individual, from €33,800 to €34,550, is welcome, as are the modest reductions of 0.25% and 0.5% in the rates of USC. We Irish still hit the top tax rate at earnings levels more than €10,000 below the UK threshold. The Minister signified his intention to amalgamate USC with PRSI in the future. The earned income credit is to increase to €1,150.
Ireland is well behind most EU countries in the rate of transfer from diesel and petrol engine vehicles to electric ones. The Minister announced an exemption from benefit in kind, for just one year, in relation to the provision by a company of an electrically propelled motor vehicle to its employees. This is welcome, but a lot more needs to be done to persuade drivers to rely on such vehicles for everyday transport. A one-year exemption is unlikely to have companies rushing to commit to a large medium-term investment!
Quite a lot of resources are to be allocated to improving the supply of housing. About €2bn is being allocated to the direct provision of social housing through local authorities, the housing assistance scheme and other targeted allocations. €750m is to be provided to a new fund called House Building Finance Ireland, for which the funds will come from NAMA (which is being wound down over the next few years).
The vacant site levy is being increased from 3% to 7% and if developers continue to hold undeveloped land through 2019 they can end up paying a cumulative levy of 10%.
In general, we welcome the Minister’s approach, which sets out a policy framework for the next several years, rather than the one-year approach which was a feature of previous Budgets.
If you want specific advice in relation to taxation or other financial matters, please contact us as we will be pleased to help.