Irish Economy
Irish Budget 2014: Bruton says he will create over 48,000 jobs in 2014 + various reactions
By Michael Hennigan, Finfacts founder and editor
Oct 15, 2013 - 5:19 PM

Michael Noonan (r), finance minister, and Brendan Howlin, public expenditure and reform minister, at Government Buildings before presenting the Budget to Dáil Éireann, Dublin, Oct 15, 2013.

Irish Budget 2014: Richard Bruton, minister for jobs, enterprise and innovation, claimed following today's Budget presentation, that more than 48,000 new jobs will be created in 2014 as a result of support from his department. It's a misleading claim. In addition, we present reactions from various groups on taxes, pensions, and other measures announced today.

The Bruton headline claim is ridiculous when at the end of December 2012, full-time jobs in both foreign-owned and internationally tradable indigenous firms were 25,000 below the level in 2000 -- 13 years ago: see 'FDI peaking' section here.

Just wait for the spoof/spin:

"Enterprise Ireland and IDA are targeting the creation of a total of 24,000 gross new jobs in supported companies during 2014 as a result of financial supports allocated under today’s Budget. Based on a conservative calculation of standard multiplier effects, this will result in the creation of more than 20,000 additional jobs elsewhere in the economy through supply companies and support services. The CEBs/LEOs are expected to support the creation of a further 4,500 jobs in 2014."

Bruton says nothing about the job losses: This is what Enterprise Ireland said last July in respect of 2012  in its annual report - - "The report also shows that client companies created 12,861 new jobs in 2012 resulting in a net increase in full-time employment of 3,338."

So the net jobs added was at a quarter of the gross rate.

The minister like his predecessors is good at announcements and spin but the record is less impressive.

Irish Budget 2014 Page

Samantha McConnell, chief investment officer, IFG Corporate Pensions: "Two things we are looking for in this budget – clarity around how the minister is going to apply the €60K cap on pension incomes and confirmation that tax relief will not be restricted for higher paid workers.
 
What we got hit with was levy increasing to 0.75% for 2014 and then instead of abolishing it as promised last year it will continue at 0.15%. DC pensions are paying for DB mistakes again despite promises to the contrary.
 
The standard fund threshold was reduced to €2M as expected and factors for implementing the €60K income threshold are confirmed. It looks somewhat complicated however. Top rate tax relief is confirmed at marginal rate.
 
Top slicing relief on tax free lump sums is abolished which for people with relatively small pension pots will be detrimental."

Catriona Coady, Senior Manager, EY Tax comments on Pensions

As anticipated, the Minister announced a reduction in the current Standard Fund Threshold (SFT) of €2.3 million – the maximum allowable pension fund at retirement for tax purposes – to €2 million. Initial expectations were that this might be lower than €2m.

In recognition of the disparity that this might create between the public and private sectors and Defined Benefit (DB) and Defined Contribution (DC) pension schemes, the Minister also announced changes to the multiplier that is used to value a pension fund. A range of multipliers is likely to be considered more equitable and bear some resemblance to actuarial valuations.
These changes are broadly welcomed.

Catriona Coady, Senior Manager, EY Tax comments on Pension Levy

The Government’s decision to introduce a lower cap of €2m on the annual pension that can be provided from approved pension arrangements will have implications for many employers and employees. Niall O’Callaghan, head of DC, Mercer noted: “The penalty for exceeding the cap is a 41% charge on the excess value, on top of paying income and USC on pension, giving a net effective tax rate of nearly 70%.”

Those who need to take immediate action are employees with pensions of €100,000 or more. There will be no change in the tax treatment of pensions up to this level. However, employees and employers should take action regarding the build up of further pension above this amount. Pension earned after 1st January 2014 will be treated more severely. Any pension earned after 1st January 2014 is multiplied by a higher age related factor rather than the current factor of 20 and therefore reaches the €2m cap more quickly.

What Employers can do

O’Callaghan commented “Building up a pension beyond the level of the cap will no longer be a tax-efficient way of rewarding, and retaining, senior staff. Employers are unlikely to want to continue making significant pension contributions that will ultimately result in tax in excess of 70%.” Employees who might be affected by the lower cap in the future are going to have to plan their pension saving more carefully.

O’Callaghan explained “the need for members to manage the right combination of pension and savings over time – throughout their working lives, into retirement and beyond – has never been more important. Employers who demonstrate flexibility and can deliver solutions which are tax and cost neutral will have created a significant retention tool for employees”.

He added, “employers should increasingly redirect the contributions that they were making on behalf of impacted employees into individual savings policies, as an alternative to pension. This enables employers to continue providing for the long term welfare of valued staff without forcing them to accumulate pension in a manner rendered tax inefficient by the cap”.

What Employees can do

As in the past, those affected by a reduction in the cap are allowed to protect any pensions already built up prior to the change. Mr. O’Callaghan noted “Most affected individuals will need to engage a pensions professional to calculate for them exactly what level of accumulated pension they can protect at the relevant date and at what point in the future they will reach the €2m cap. He added, “Even those whose pensions do not currently exceed €100,000 p.a. may need to act. They may be hit by the proposed cap if their current Additional Voluntary Contributions (AVCs), future service contributions or salary increases raise their pension benefits above the limit over time.”

Pensions Levy

The Minister stated last year the pensions levy of 0.6% would be abolished at the end of 2014. This year he announced a new pension levy 0.15% to continue to fund the jobs initiative and contribute to the cost of pension schemes deficits of insolvent employers. The detail is yet to be seen but it would seem extremely unfair if members of Defined Contribution schemes would have to contribute to an insolvency fund. “This announcement of a new levy is yet another attack on pensions and will deter people from saving for their future”, according to Niall O’Callaghan. 

Jarlath O’Keeffe, Tax Partner at EY comments on VAT measures

VAT reclaim on home improvements

“Allowing homeowners to effectively reclaim VAT on home improvements via income tax credits will hopefully encourage people to press ahead with planned renovations or extensions. This has the potential to sustain local employment in the construction sector while simultaneously curtailing the growth of the black economy.”

VAT rate for Tourism sector

“Those who have been vocal to the removal of the 9% VAT rate will see its retention as a victory. There is no doubt that the introduction of the measure has been a success and provided the tourism sector with a timely boost. It is the hope that its retention will lead to further growth in the sector.”

Air Travel Tax

“The reduction of Air Travel Tax to 0% with effect from 1 April 2014 provides airlines with an incentive to expand routes into Ireland giving the country’s tourism industry a further shot in the arm.”

Excise duty increase on tobacco

“The increase will add 10% to the price of a packet of cigarettes; a move that will please the health lobby groups. They may have pushed for a more significant increase, but the Minister would rightly point to a potential resultant increase in black market activity and a reduction to the tax take.”

Excise duty increase on alcohol

“Publics are likely to have balked at the increase in duty on alcohol products and will no doubt argue that a 10% increase on a pint of beer allied to a 10% rise on a measure of spirits will have a negative impact on employment in the industry.

No reduction in VAT rate on construction services

“Introducing a reduction in the rate of VAT on construction services could have stimulated activity in the labour-intensive home improvement sector. This, in tandem with an investment programme designed to tackle broadband or energy-related infrastructure projects could have led to the creation of long-term sustainable employment. As it stands, the share of construction employment in Ireland is below the pre-boom average of 7.5%”

Ian Collins, Tax Director EY Ireland comments on R&D 

“Today’s Budget saw the introduction of some of the recommendations made in the Report on the Review of the Research & Development (R&D) Regime. The report highlights the importance of the R&D tax credit regime in assisting Ireland’s EU2020 target of achieving a level of R&D expenditure of 2.5% GDP.

“The report also draws attention to the importance of the regime in attracting Foreign Direct Investment into Ireland and encouraging firms to invest in R&D. While it states that a major overhaul of the regime is not required, it does acknowledge the administrative burden of the 2003 base year and recommends phasing it out altogether “when resources allow”.

“The recommendations that were incorporated into the Budget will see an increase in the restriction of outsource R&D expenditure to third parties from 10% to 15%. Amendments to the key employee tax credit provision will also be introduced, although no specific details have been given. 

“Furthermore, the amount of expenditure eligible for the R&D tax credit on a volume basis has been increased from €200,000 to €300,000. This will give companies an additional €25,000 of R&D tax credit or a total increase of €75,000 from the first introduction of the volume basis; a welcome boost for companies carrying on R&D in 2003.

“Companies may have liked to see more, but these measures are a welcome step in the right direction and an appreciation of the burdens currently carried by those undertaking this activity.” 

Frank O'Keeffe, head of the EY Entrepreneur Of The Year Programme comments on Entrepreneurship 

The Budget’s focus on entrepreneurship, innovation and investment is a positive step forward with focused reliefs on Capital Gains Tax and R&D Tax Credits.  The Start Your Own Business scheme will give some hope to the unemployed who are considering setting up their own businesses and for entrepreneurs in the tourism, construction and TV & Film production sectors there is some welcomed news to assist in sustaining and growing their businesses and employee numbers.

Ray O’Connor Tax Partner EY Financial Services comments on Banking Measures including:

Increase in Deposit Interest Retention Tax and exit tax rates

“The scale of the increase in the DIRT rate to 41% came as something of a surprise to the banking industry when first mooted in the media. Confirming the rate, the Minister added detail by explaining that it would also apply to exit tax on life assurance policies and investment funds held by Irish residents.

“The new rate, applicable from 1 January 2014, makes the 20% rate that applied as recently as 2008 seem like a distant memory. However, institutions might find some small crumbs of consolation in the fact there will no longer be a higher rate of DIRT/exit tax in certain situations.

“Banks in particular will be watching for any signs of whether the new 41% rate will have any identifiable effect on their retail deposit base.”

Bank levy

“The Minister’s imposition of a new bank levy raising €150 million per annum for three years is further bad news for banking, specifically the domestic banking sector.

“As was the case with the levy of €100m per annum, which operated between 2003 and 2005, the formula will depend on the level of DIRT payment made by each institution, in this case based on 2011 DIRT payments. The international banking sector should emerge largely unscathed as the bulk of DIRT payments are made by the retail banks operating in the Irish market.

“This levy will operate independently of the Credit Institutions Resolution Fund Levy, introduced in late 2012, which aims to collect €25m per annum over four years from both the domestic and international banking sectors.”

Tax losses of National Asset Management Agency (NAMA) banks

“The main Irish banks have substantial deferred tax assets, predominantly consisting of the potential value of their tax losses carried forward. The Minister has abolished the special rule applicable to the tax losses of banks who participated in the NAMA scheme.

“Under this rule, NAMA participating institutions could only use tax losses carried forward against a maximum of 50% of future years’ profits, though that could include profits of other group companies.

“Unlike the other main banking measures announced in the Budget, namely the bank levy and the increased DIRT rate, the abolition is relevant only, in practice, to the two main domestic banking groups, Bank of Ireland and Allied Irish Banks (AIB). The abolition of the rule should be of some assistance to these two groups when converting their deferred tax assets to actual tax savings.”

We welcome the Minister's commitment to maintaining the competitiveness of Ireland's corporate tax regime. EY will continue to work with stakeholders on Ireland's IP regime. We will continue to suggest improvements to our existing regime and the introduction of new regimes.

John Heffernan, Tax Partner at EY, comments on CGT relief afforded to entrepreneurs:

“Entrepreneurs will welcome the new Capital Gains Tax (CGT) relief announced today by Minister Noonan. The current 33% rate is a significant disincentive to serial entrepreneurs and reduces their ability to reinvest in new businesses and create jobs. In contrast, the UK applies a special 10% CGT rate for entrepreneurs.

“The new relief allows entrepreneurs to reduce the CGT payable on new investments by the lower of the CGT paid by the individual on a previous disposal of assets from 1 January 2010 and 50% of the CGT due on the disposal of the new investment, although commencement is subject to EU State Aid approval.

“Entrepreneurs will also appreciate the fact that the Employment and Investment Incentive will be immune to the High Earner restriction, this should increase the level of investment made by high-earners in new businesses.”

John Heffernan, Tax Partner with EY comments on REITS

“REITS may only have become effective last year, but the early indicators suggest it is attractive to both domestic and overseas investors. Minister Noonan’s decision to add REITS investments to the five investment options already in place under the Immigrant Investor Programme is to be welcomed. This could result in significant levels of new investment in Irish real estate and underpin the recovery of the property market.”

John Heffernan, Tax Partner with EY comments on CGT property exemption

“The seven-year Capital Gains Tax exemption for investment in real estate has been a major factor in increased investor interest in Dublin’s property market. Extending the deadline by a year to December 2014 will allow more time for supply to the market to improve thus satisfying pent-up investor demand.”

Kevin McLoughlin, Head of Tax for EY Ireland comments on Corporation Tax Proposals

12.5% Corporation Tax rate

The Minister reiterated Ireland’s commitment to the 12.5% Corporation Tax rate applicable to trading profits. The 12.5% rate will remain a cornerstone of Ireland’s fiscal policy and the Government will continue to assert Ireland’s sovereign right to set tax rates consistent with the EU Treaty.

This merely restates Ireland’s long-standing position on corporate tax policy. It will be noted that Mr Pascal Saint-Amans has recently confirmed that Ireland competes fairly for foreign direct investment and that it is anticipated that Ireland’s regime will compare favourably in the context of the BEPS Action Plan.

Non-resident Irish companies

Companies that are managed and controlled outside Ireland are generally not subject to Irish corporate taxes unless they carry on a business in Ireland via a permanent establishment. Ireland generally taxes companies in a manner which is consistent with double tax treaties.

With effect from 1 January 2015 Irish rules will apply to circumvent the possibility of a “stateless” company. This may require certain companies to review their current policies and governance procedures to ensure alignment with the enhanced rules. Draft legislation will be released in the Finance Bill.

Ireland’s international tax charter

The Minister has reiterated a number of key aspects of Ireland’s policy and also sets out “Ireland’s International Tax Charter” - a set of policy objectives and commitments for how Ireland views and will deal with a variety of international tax policy issues.

The key points are summarised below:

• Ireland is open for business.
• The Government will continue to take steps to enhance Ireland’s attractiveness through investment in our people, investment in our infrastructure and our strong commitment to Europe.
• Ireland will continue to compete fairly for foreign direct investment.
• Ireland will consider changes to improve the competitiveness of our tax regime in terms of impact on sustainable employment and economic growth. Improvements to the Research & Development (R&D) credit regime were also announced today.
• he Irish system is open, transparent and statute based and this will not change.
• Ireland will continue to actively engage constructively and purposefully in relation to international tax matters at Organisation for Economic Co-operation and Development (OECD) – including Base Erosion and Profit Shifting (BEPS) and Forum on Harmful Tax Practices and European Union (EU) level – including Code of Conduct and Platform for Tax Good Governance – building on the work pushed forward during Ireland’s Presidency of the EU in countering tax fraud and aggressive tax planning.
• Ireland welcomes the OECD/G20 coordinated effort to dealing with the challenges posed by BEPS and notes that the Irish regime already aligns profits with substantive operations.
• A commitment to supporting developing countries to raise domestic revenues efficiently and allow them to exit from official development assistance.
• Ireland is committed to global automatic exchange of tax information in line with existing and emerging EU and OECD rules and will bring forward domestic law on completion of OECD’s work.
• Ireland has a general anti-avoidance rule on the statute books since 1989 and calls on all EU Member States to introduce such domestic legislation.
• Ireland also has mandatory disclosure rules applicable to certain tax schemes.

Active Retirement Ireland (ARI) today criticises the Government’s Budget announcement as unfair and said that it would lead to untold hardship among older people. Peter Kavanagh, ARI spokesperson, said, “This is a Budget that targets the young, the old and the sick and takes no account of the current circumstances of any of these already-marginalised groups.”

“The telephone allowance is used by many older people, who live alone or with frail and vulnerable dependents to enable them to have a personal alarm system, as well as to stave off loneliness and isolation. These people will suffer directly after this shameful decision. The young unemployed, sick people, and older people are bearing the brunt of a harsh austerity Budget that does not take into account the current financial circumstances of many of these people. Energy prices have risen as much as 34% since the last income gain for pensioners in 2008, and yet they are asked to take another cut to their effective income this year.”

Kavanagh also gave a cautious welcome to the introduction of free GP care for children under five. “We welcome the announcement that we are taking the first step on the road to universal free healthcare, but we are concerned that there is no roadmap or whitepaper to accompany this decision. We sincerely hope it’s not a populist decision made with the Local and European Elections in mind, rather than a legitimate indication of progress. We need to take a long, hard look at how this €40 million is going to be funded,” he said.

Tax increases in Budget 2014 were generally confined to specific measures aimed at targeting the accumulation of capital, however disposable income for most families will fall again in 2014 as a full year of property tax kicks in.

Note: assumes a married couple with 2 children, home owners of a property worth five times the primary earner’s salary, all income earners contribute 15% of gross income to a pension scheme.

According to business advisory firm Grant Thornton, a family with only one parent earning €40k, with two children and a house valued at €200k, will face a tax bill 132% higher than in 2008, and €3,700 less in disposable income. A similar family, where both parents earn €40k, will face a tax bill that has risen 55% in 6 years and have over €6,200 less to spend.

Grant Thornton Tax partner Peter Vale said: “When you focus on the cumulative impact of 6 years of austerity budgets, the challenges families will face paying their bills in 2014 compared with in 2008 is stark. Based on our analysis, a family on an average income will have over €3,700 less to spend in 2014 compared to 6 years ago.

On a more positive note, there were no major income impacting measures announced today, except for those with large pension pots or high levels of interest income from cash savings. Few would have envisaged an increase in the DIRT rate of such magnitude. This is clearly an all out attack on savings in an attempt to encourage spending in the domestic economy.”

Other key issues Peter Vale noted in the budget:

Increased DIRT tax “The DIRT tax on savings has now gone from 20% to 41% in a short period of time. Whilst the move may encourage people to stop hoarding cash and invest in more productive assets, it also increases the likelihood of greater non compliance in terms of returning details of interest income to Revenue”

Tax Residency Changes: “The change announced regarding Irish registered companies is confined to companies with no recognised place of tax residence. This should not impact on any Irish incorporated companies that may be tax resident in another low tax jurisdiction and is unlikely to have an impact on anything other than a tiny number of Irish companies. However it sends out the right message in terms of Ireland’s desire to be part of the global initiative to resolve global tax inequities.”

Capital Gains Tax rate for Entrepreneurs: “The CGT relief for entrepreneurs who reinvest gains from a disposal is a welcome step to reconcile the disconnect between the government’s encouragement of start-ups, and the high CGT rate paid when entrepreneurs exit their business. However it’s notable that Ireland’s regime is still unfavourable compared to the 10% rate available in the UK, and it’s disappointing that no similar relief for dividends has been introduced.”

Pension Changes: “Budget 2014 continued the trend of recent years of making it less attractive to divert earnings to a pension pot. It is difficult to predict the longer term impact of these changes in terms of the ability to provide for life post-retirement, particularly in the context of increased life expectancy. However the likelihood is that there will be a longer term cost for the State from these measures as people are given less incentive to provide for themselves.”

Free Medical Care for Under-5s: “Parents with young children will probably welcome this measure and the reduced GP bills it means they will face. However they will have already lost €432 per child through the cut in child benefit, so they are really just getting back money they had already forfeited.”

VAT scheme for construction sector: “The VAT rebate scheme aimed at incentivising homeowners to renovate their principal residence is a positive step and should provide a further boost to a critical sector. It only applies to works carried out by registered builders and as such will also increase compliance within the sector.”

CGT exemption for property: “The extension of the CGT exemption for property to 31 December 2014 is another welcome development and should help avoid any post year end dip in the property market at a time when the sector is showing signs of recovery”

Commenting on today’s budget, Eamonn Siggins, Chief Executive of the Institute of Certified Public Accountants in Ireland said;

“We broadly welcome the pro-business measures announced by Minister Noonan today. Within the constraints in which the Minister was operating this budget is a deliberate attempt to support entrepreneurs and stimulate innovation with the purpose of protecting and growing employment.”

Particular measures of note include:

-The Home Renovation Incentive which will provide an income tax credit to homeowners who carry out renovation and improvement works on their homes in 2014 and 2015. CPA Ireland have called for such an incentive previously, which challenges the fiscal damage meted out by those operating in the black economy, acts as a stimulus for self-employed trades people and will release money into the domestic economy.

- The Start Your Own Business Scheme (SYOB) which is a positive signal of intent to support entrepreneurs, particularly those that have been out of work for a period of 15 months.

- The removal of the Employment and Investment Incentive (EII) from the high earners’ restriction is a practical measure to stimulate investment

- Capital Gains Tax Entrepreneurship Relief encourages reinvestment in business and will stimulate entrepreneurship.

Additional welcome measures include improvements to R&D Tax Credit and the increase in the VAT cash accounting threshold. These measures constitute significant support for small and medium enterprises by improving cash flow, fostering innovation and supporting entrepreneurship.

Jonathan Hillyer, managing partner at HWBC - an independent Irish property firm - comments on Budget 2014’s impact on the property sector:

Property Investment CGT Waiver

“I welcome the Minister’s decision to extend the 7 year Capital Gains Tax waiver for property investments introduced in Budget 2012 for another year. With recovery in the market still fragile and non-existent in many areas of the country, the extension will help strengthen investor confidence.”

Stamp Duty Levels Maintained

“The Minister has correctly resisted temptation to increase stamp duty levels on property transactions. Any tinkering by the government to the status quo could adversely affect investor confidence and the recovery we are seeing in some segments of the property market. Increases to stamp duty would not only delay recovery in those segments where prices are still volatile, but could trigger further price falls.”

Commercial property consultants CBRE this afternoon reacted favourably to Budget 2014 welcoming a Budget which they describe as pro-business and pro-jobs. According to Marie Hunt, head of research at CBRE, “There were several measures introduced in today’s Budget which will help stimulate job creation in the Irish economy that will in turn benefit the construction and property sectors which are already showing some signs of improvement”.

CBRE particularly welcomed the retention of the 9 per cent rate of VAT for the hotel and tourism sector and the removal of air travel tax, which they say is critical to sustaining the momentum witnessed in this sector of the economy over the last 12 months in particular. The property consultants also welcomed the Government's commitment to retain Ireland’s 12.5 per cent corporate tax rate, which they say is critical to inward investment and job creation, which in turn drives demand for office and industrial accommodation throughout the country. CBRE also welcomed the extension for a further 12 months of the capital gains tax (CGT) waiver first introduced two years ago for purchasers of residential and commercial property who retain these properties for a period of 7 years. CBRE say that this will alleviate pressure that had been building over recent months to have transactions completed by the deadline of 31st December 2013 and will ensure a steady flow of transactional activity into 2014.

The property consultants welcomed the decision to extend the Living City Initiative to the cities of Cork, Galway, Kilkenny and Dublin. However, CBRE say that the Government missed an opportunity today to introduce an incentive package such as the Business Premises Renovation Allowance (BPRA) which operates successfully in the UK to encourage the redevelopment and refurbishment of secondary office accommodation – a measure which they say would help alleviate the shortages of prime office accommodation in core locations, which organisations such as the IDA have been alluding to for some time now.

The Society of Chartered Surveyors Ireland (SCSI) has welcomed a tax incentive for homeowners undertaking renovations introduced in the Budget which will enable homeowners to reclaim VAT on completed jobs worth more than €5,000 up to a maximum of €30,000.

The SCSI said that the measure would support legitimate businesses in the construction sector, improve standards and provide a boost to homeowners who may not be in a position to move.

Micheál O’Connor, president of the Society of Chartered Surveyors Ireland (SCSI) said “In the construction sector the effect of the shadow economy operators is detrimental and is having a negative impact on legitimate construction businesses by undermining their capacity to compete, risking their sustainability and potential to create jobs.

Today’s announcement is a welcome support measure both for homeowners seeking to renovate or extend their property and for legitimate contractors and will also improve standards and energy efficiency in the sector. Given recent issues such as Priory Hall, it is imperative that standards are upheld which may not be the case with operators in the shadow economy.” he said.

In relation to measures to improve the supply of property, the SCSI welcomed the extension to 4 cities of the City Living initiative and the proposed construction of 4,500 new homes by NAMA.

Mr O’Connor said; “The extension of the immigrant investment programme to include REITs is also welcomed and will also further improve liquidity in the market. The extension of Capital Gains Tax Relief until the end of 2014 will also support further investment in the property sector”.

The SCSI also welcomed the Start your Own Business initiative and said that it would help boost legitimate employment in the construction sector.

Hannah Dwyer, head of research at Jones Lang LaSalle said that “I broadly welcome the property measures introduced in the Budget this year, as the Minister for Finance has looked to build on the nascent recovery we have already started to see in the property market in the last 12 months. Extension of the CGT relief, further support for REITs, and measures to enhance Ireland’s competitive advantage will continue to boost investment into Ireland. There are also Budget property measures focused on stimulating areas of the property sector that need additional encouragement, such as construction activity, the retail sector and residential supply”.

The extension of the CGT tax relief to the end of 2014 and the expansion of the REIT legislation will further encourage investment activity in the property sector and will help to broaden the depth and type of capital available.

The news that NAMA will be supporting housing and office construction will help to boost these sectors and deliver much needed homes and office space, particularly in Dublin city centre. The announcement that NAMA will also be providing investment in commercially viable retail projects will also support the retail sector which is still faced with significant challenges. The Agency has also announced that it will be making available of €2bn of vendor finance to fund Irish projects in the next 2 years.

It is positive to see that the Government has recognised the need to promote Ireland’s competitiveness and has expressed its commitment to keeping its 12.5% Corporate Tax Rate. Measures that are focused on stimulating investment and innovation, such as the R&D Tax Credit increase to 15% and the Removal of Stamp Duty charges on shares listed on Enterprise Securities Market, will help to encourage foreign direct investment into Ireland and help to create additional employment, particularly in highly skilled, high value sectors.

The hotel sector will be relieved to see that the 9% VAT rate has remained for the tourism and hospitality sector. Hotels were impacted significantly by the property crash, but has shown some resilience in the last 12 months. The freezing of the VAT rate will help to further stabilise this part of the property sector.
The introduction of the Home Renovation Incentive will act as a stimulus to the construction industry and will support tax compliance from homeowners.

The Irish Stock Exchange (ISE) welcomes the Government’s 2014 Budget announcement that it is to exempt from stamp duty the transfer of shares of companies on the Enterprise Securities Market (ESM). Stamp duty is currently charged at a rate of 1% on investments made in the shares of Irish companies.

The ISE has long campaigned for the removal of stamp duty on investing in Irish companies – this initiative enables ESM companies to operate on a level playing field with their international peers when competing for international investment. It matches similar proposals made in the UK earlier this year and moves the Irish market more in line with European norms.

The exemption of ESM companies from stamp duty, the ISE’s market for small to medium sized growth companies, supports enterprise, growth and employment in Ireland and will help Irish companies to build scale in their business through public markets. It will also have a positive impact on investors including pension funds which invest in the shares of Irish companies quoted on the ESM.

ISE chief executive Deirdre Somers said the proposal is an essential step in creating the next generation of leading Irish publicly-quoted companies and meets some of the Government’s stated objectives in the Action Plan for Jobs – to incentivise dynamic companies to choose growth and scale using the IPO route as an alternative to trade sale.

“Ireland needs to ensure that Irish companies are as attractive as their international peers when it comes to investment. We welcome that ESM companies will now be exempt from stamp duty as this tax acted as a barrier to international investment. This initiative is an important step in the creation of the next generation of leading companies in Ireland which choose the IPO route to grow - like Ryanair, Kerry Group and Paddy Power. High-quality, scalable businesses can create jobs and deliver much needed growth in the Irish economy”, said Somers.

Ibec today said the reduced size of budget adjustment will give some relief to the economy, but there are too many new taxes and increased costs for business. These will dampen the economic and jobs recovery, which has gained momentum in recent months. New measures to support small business, encourage entrepreneurship and underpin activity in the domestic economy are very welcome.

Ibec CEO Danny McCoy said: "Reducing the economic adjustment by €600 million will help protect incomes and spending power, but there are still too many new taxes. The excise increase will be counterproductive. The second hike in two years risks pushing trade north of the border and is unlikely to deliver for the Exchequer. The retention of an unfair pension levy, which government had promised to drop, is a major disappointment; while the increase in the lower rate of employers' PRSI and changes to illness benefit will make it more difficult for companies to create jobs. Increases to employment costs are at odds with the government's own jobs strategy. The Irish economy is already taxed enough.

"Despite constrained finances, an effort has been made to support the economy. Retaining the reduced VAT rate for the hospitality sector was sensible. The package for small business and entrepreneurs, including reform of capital gains tax and the Employment and Investment Incentive Scheme, will help a sector that has an enormous potential to create jobs and revive struggling communities. A revised R&D tax credit scheme will further enhance Ireland's position as a centre for innovation. The home renovation tax credit will help the domestic economy and construction jobs.

"Despite the need for a harsh budget, the economy is recovering. Budgets will get a lot easier in the coming years," concluded McCoy.

Retail Ireland, the Ibec group that represents the retail sector, said today's Budget contains positive measures aimed at tackling the black market, but the increases in excise duties are unwise and will impact negatively on consumers and retailers.

Retail Ireland Director Stephen Lynam said: "Retailers welcome the freeze in fuel duties and the freeze in VAT rates. The black market costs the State hundreds of millions of euro every year and measures designed to tackle the problem are also welcome. Retail Ireland has long been campaigning on the issue. However, the excise increase will negatively impact on responsible consumers and reduce spending in many retail outlets. Retail sales have fallen by 25% since the end of the boom and 50,000 retail jobs have been lost. If the government wants a sustained economic recovery it needs to do more to help consumers and support Ireland's biggest industry - retail."

Dublin publicans bitterly disappointed at excise increase

"20% increase will lead to pub closures and the loss of up to 2,000 jobs nationally"

Trade welcomes retention of 9% VAT rate

Tuesday 15th October 2013. Dublin publicans have strongly criticised the Government's decision to raise the excise rate on alcohol in Budget 2014.

The publicans said the 20% increase in the excise rate would translate to a 10 cent increase on the price of a pint of beer and on a measure of spirits with additional 50 cent excise being imposed on a bottle of wine.

The chief executive of the Licensed Vintners Association, Donall O'Keefe said his members were bitterly disappointed at the increase and said it would definitely lead to pub closures and job losses.

"This increase flies in the face of the Government's stated objective of stabilising the domestic economy and promoting jobs and growth. This move will have precisely the opposite effect on the pub sector. It is the second successive Budget we have seen a substantial excise hike in an environment where the pub sector is under huge pressure.

The increase means one third of the retail price of a pint of beer will go straight to the Government and it also means Ireland has one of the highest excise levels in Europe" O'Keefe said.

According to the LVA while retail sales generally have fallen 12.5% over the last six years, the pub trade has seen a decline of 33%. In this context the Association said its members cannot understand why excise rates are being hiked again.

The Association welcomed the decision to retain the 9% VAT rate for the hospitality sector.

"This decision is a positive move and will come as some comfort to our members. However the majority of bar owners are dependent on the bar trade and the excise increase will hit both them and their customers very hard" O'Keefe concluded.

Check out our subscription service, Finfacts Premium , at a low annual charge of €25 -