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Last Updated:
Apr 24, 2009 - 5:31:05 PM |
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| The Tánaiste and Minister for Finance, Brian Cowen T.D.
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The Tánaiste and Minister for Finance, Brian Cowen, T.D. today published Finance Bill 2008 which must be enacted by the Oireachtas by 5 April next. He said:
“This is the fifth Finance Bill that I have introduced to the House. In the previous Bills I have been able to introduce measures that supported business and that make the tax system fairer and significantly lighten the burden on low and middle income earners. In this Bill I will continue with this approach while also seeking to promote care for our environment through a range of initiatives I announced in the Budget. ”
The Institute of Chartered Accountants in Ireland (ICAI) said today that the Finance Bill contains few new initiatives over those announced at Budget time, focussing instead on anti avoidance and “tidy up” measures for existing tax law.
Deloitte Commentary and Analysis
Deloitte says the Finance Bill 2008 does not go far enough in delivering the measures needed to maintain Ireland as a favourable location for knowledge based investment. In particular, it was hoped that the provisions announced in relation to intellectual property and R&D tax credits would go further to encourage investment of this nature.
The Bill confirms measures announced on Budget including:
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increases in the personal credits and bands, to ensure that low income earners are kept out of the standard rate band and average earners are kept out of the higher rate band
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increased tax credits for the elderly, lone parents, widowed persons and widowed parents and those with a disability or those who care for a person with a disability
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a further increase in the ceilings up to whichfirst-time buyers can claim mortgage interest relief
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the reform of the stamp duty regime for residential property, where the old system has been replaced by an exemption of €125,000, a 7% rate on the next €875,000 and a 9%
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the reduction in the stamp duty claw-back provision for new residences and for first-time buyers from
5 to 2 years
- a number of "business friendly measures" including revised preliminary tax payment arrangements for Corporation Tax aimed at small and start-up companies,and the enhancement of theTax Credit scheme for R&D expenditure
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a revised VRT system to take greater account of carbon dioxide emissions. From
1 July 2008 the revised VRT system will exempt series productionelectrical cars from VRT and provide VRT relief of up to €2,500 for hybrid and flexible fuel cars.
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a reduction in the VAT rate applicable to certain supplies used for the agricultural production of bio-fuels is being reduced from 21% to 13.5%
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an increase in theVAT registration thresholds for small businesses with effect from
1 May 2008, from €35,000 to €37,500 in the case of services, and from €70,000 to €75,000 in the case of goods
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a revised system for applying VAT to Commercial Property transactions
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tax relief in respect of Fishing Decommissioning Scheme payments, to encourage take-up under the new EU-approved scheme for the white-fish fleet. In addition, the capital allowances regime for fishing boats and equipment will be amended to allow the spreading over 5 years of any balancing charges arising from the decommissioning of a vessel for the purposes of this scheme
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the introduction of Capital Gains Tax relief on Farm Partnership Dissolution. The relief will allow farmers to withdraw assets from a partnership without incurring a charge to CGT.
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the spreading over 6 years of tax arising from diversification aid for the restructuring of the Sugar Beet industry and the removal on tax clawbacks on commencement ofMilk Production Partnerships
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the reform of the stamp duty liable on financial cards and cheques
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an increase in the stamp duty and CGT threshold exemptions onSite to Child from €254,000 to €500,000
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extension of film relief for another 4 years until end 2012
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a small excise tax on electricity for non-domestic (i.e. business) use to comply with the 2003 EU Energy Tax Directive
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increases intax relief for those in rented accommodation
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making the BES more accessible for recycling companies.
The Tánaiste highlighted a number of the other significant new measures in the Finance Bill as follows:
Allowances for Energy Efficient Equipment - the Tánaiste announced details of a new tax initiative aimed at encouraging businesses to purchase certain energy-efficient equipment. This accelerated capital allowance incentive will allow companies to claim the full cost, in the year of purchase, of specified energy-efficient equipment against their taxable income. The initiative will apply for 3 years.
E-Stamping– the Tánaiste announced new provisions to facilitate the introduction of e-stamping. Revenue is currently engaged in a major strategic development that will see the introduction of a self-service e-stamping system. That system will allow a full self service on-line process where the user can file, pay and receive an instant stamp without Revenue requiring to see the deed in the majority of cases. It is hoped to introduce the service in the second quarter of 2009.
Capital allowances for capital expenditure on buildings and structures in Caravan parks and Camping sites – the Tánaiste announced as a tourism initiative that capital allowances at the rate of 4% over 25 years in respect of capital expenditure on buildings and structures is being extended to such buildings and structures used in caravan parks and camping sites registered with Fáilte Ireland. This measure will help this sector of the tourist market and encourage more Irish people to holiday at home.
General Exemption Limits – the Tánaiste announced that the special limits which operated to keep those under 65 on low incomes out of the tax net are being abolished because the ordinary entry point to the tax system is now well above them and the limits consequently are no longer needed.
Employee Financial Participation – The Tánaiste said that changes are being made to the legislation governing Employee Share Ownership Plans (ESOPs) and Save-As-You-Earn (SAYE) schemes, in response to requests received from the social partners. In the case of ESOPs, there will be some flexibility provided in relation to the requirement for a ten-year loan period in relation to loans used to purchase shares for employees. Where the ESOP is in a position to pay off the loan earlier, the Revenue Commissioners can reduce the period on a case-by-case basis. In addition, the maximum monthly amount that can be saved under an approved SAYE scheme is being increased from €320 to €500. These changes reflect the Government’s commitment to fostering partnership at the level of the enterprise through employee financial participation schemes.
Profit Resource Rent Tax - the Finance Bill will give effect to last year's Government Decision to change the fiscal terms applying to petroleum exploration and production activities. A new Profit Resource Rent Tax will apply in respect of any new petroleum lease which follows an exploration licence awarded by the Minister for Communications, Energy & Natural Resources after 1 January 2007. Additional taxes of between 5% and 15% will apply depending on the profitability of petroleum fields. These taxes will be in addition to the 25% corporation tax rate which currently applies to profits from such activities. This will support the raising of additional revenues from the oil and gas industry in relation to the exploitation of our natural resources.
Film Relief – The Tánaiste announced that he was also increasing the eligible expenditure cap on film projects from €35million to €50million.
Vat on Non-Oral Contraceptives - The Tánaiste also announced that the vat rate applicable to non oral contraceptive products is being reduced from 21% to 13.5%.
Anti Avoidance Provisions – The Tánaiste announced that new measures are being introduced to counter tax avoidance in the area of convertible securities and employee benefit trusts. In the case of convertible securities, an additional income tax charge will be imposed on the occurrence of a number of events associated with such securities (including but not limited to conversion to a security of higher value and disposal). In the case of employee benefit trusts, the meaning of an employee benefit contribution is being expanded to ensure that, as intended by current provisions, companies only get a deduction for such contributions when the employees receive the benefit.
Revenue Powers – The Tánaiste said that he was introducing a number of measures to counter tax avoidance including a new measure in the area of Revenue Powers to support Revenue tackling criminal gangs mainly in the area of Customs and Excise. The new measure provides for an authorised officer of the Revenue Commissioners to question suspects in Garda custody, who have been arrested and detained by the Gardaí in respect of certain Revenue offences. The offences concerned are serious indictable offences under Revenue law.
Finance Bill
Click here for Finance Bill 2008 Explanatory Memorandum
List of Items
The Institute of Chartered Accountants in Ireland (ICAI) said today that the Finance Bill contains few new initiatives over those announced at Budget time, focussing instead on anti avoidance and “tidy up” measures for existing tax law.
“There will be some disappointment that measures necessary to enhance Ireland’s position as a destination for Foreign Direct Investment are not contained in the Bill. ICAI has been promoting ideas such as modernising the tax regime for the Headquarters of multinational companies. If there is to be any further innovation to our tax system in this regard we will have to wait until further amendments to the Bill are announced at Committee Stage,” said ICAI Director of Taxation Brian Keegan.
“On a more positive note new VAT rules should help remove uncertainties when dealing with commercial property lettings and sales. This was a notoriously difficult area of tax law, laden with traps for the unwary. The new rules for property comprise part of a wider package of VAT reforms.”
“A high proportion of this Bill deals with VAT and other indirect taxes. VAT now yields more than income tax to the Irish Exchequer, so it is particularly necessary to have up to date and fair rules,” said Keegan.
Among the single biggest “new” items is the arrangement for the taxation of Petroleum Exploration and Production, introducing an effective Corporation Tax rate of up to 40%.
The Bill has many more changes affecting the Business community than will affect individual Income Tax payers. Changes to tax incentives for Research and Development are confirmed in the Bill, as are the changes to Stamp Duties announced at Budget time.
Finance Bill 2008 – more favourable measures for Ireland Inc were needed
Deloitte says the Finance Bill 2008 does not go far enough in delivering the measures needed to maintain Ireland as a favourable location for knowledge based investment. In particular, it was hoped that the provisions announced in relation to intellectual property and R&D tax credits would go further to encourage investment of this nature.
Commenting on the provisions announced in Finance Bill 2008, Joan O’Connor, Tax Partner, Deloitte said: "In the context of Ireland’s agenda for a knowledge economy, Finance Bill 2008 does not focus on any tax deduction for acquired intellectual property and indeed amends a long standing provision, ‘know-how’, which is negative in the context of marketing Ireland as a favourable location."
Similarly, the R&D measures announced in the Bill, which see 2003 remain the base year for tax credits until 2013 does not go far enough to alleviate investor uncertainty with regards to Ireland.
"The Finance Bill simply confirms what was in the Budget. Investors looking to Ireland require increased assurance, fixing 2003 as the base year indefinitely would have provided increased certainty and would certainly have been a more favourable measure," O’Connor concluded.
