| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 Asia Economy


How to use our RSS feed

Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.


Finfacts is Ireland's leading business information site and you are in its business news section.

We provide access to live business television and business related videos from: Bloomberg TV; The Wall Street Journal; CNBC and the Financial Times. Click image:


Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Irish Economy

Global Income Per Capita

Global Cost of Living

Irish Tax 2008

Climate Change Reports

Global News

Bloomberg News

CNN Money

Cnet Tech News


Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News




Content Management by interactivetools.com.

News : Irish Last Updated: Apr 24, 2009 - 5:31:05 PM

Irish Budget 2009: Reactions from Economists, Accountants and Various interests/organisations
By Finfacts Team
Oct 14, 2008 - 7:13:55 PM

Email this article
 Printer friendly page

Click for Finfacts Main Budget 2009 Page - - Oct 14, 2008 -  for summaries etc

Department of Finance, Dublin.
Irish Budget 2009:
We present reactions to the Budget from economists, accountants and various interests/organisations.

Rossa White, economist at Davy says the Budget won't damage economy too much in 2009; cut in stamp duty on commercial property may help increase transactions:

Budget has not taken much cash out of economy

  • The Budget will help rather than hinder an economy facing recession in 2009. The government has not slashed spending or raised taxes too much.

  • The targeted General Government Balance of -6.5% of GDP means that fiscal policy is not that deflationary. We were worried that it would cut spending or raise taxes by another €2bn to target a deficit of 5.5% of GDP. But the final deficit is likely to be 8% of GDP next year, as the government's macro forecasts (-1% GNP versus our -3.4%) and tax revenue projections are too optimistic.

  • Crucially, the government has looked long-term. Capital spending will be €8.2bn, or 5.4% of GNP, on our estimates.

Taxes increased by €1bn or 1% of disposable income

  • The tax hikes could have been much worse. An income levy was introduced, which will yield €1.2bn. But the tax bands were indexed, which will save households €200m. So the hit to incomes is €1bn (0.7% of GNP) or exactly 1% of disposable income.

  • But social welfare was more than indexed for inflation. The rates were increased about 3% on our calculations, but inflation will be only 1% next year so that will boost incomes by about €400m.

Stamp duty cut on commercial property is welcome

  • Stamp duty was cut from 9% to 6% for commercial property. And a housing package was announced, though without much detail. We expect this to help some buyers who cannot currently access mortgages to avail of local authority or affordable housing.

Initial reaction from Pat McArdle, Chief Economist at Ulster Bank Group: “Overall the Minister was less ambitious than we expected. His growth forecasts looks optimistic - tax revenue will likely disappoint in 2009 and in the remainder of 2008 - and the 6.5% Budget Deficit means that he has €12 billion to claw back in coming years. We have a long way to go.

He made a reasonable start to cut state bodies but was short on detail regarding public sector spending initiatives. As a result, current spending is up by 3.6%, more than it should be and driven by social welfare and pay.

He raised €2 billion in taxes, as we expected, but €0.5 billion of this is one-off cash adjustments from bringing forward payment dates for Corporation Tax and CGT. Again, this postpones the evil day.

There was a wide range of tax increases, as expected, and centred on an income tax levy. Indirect tax increases will boost inflation by about three-quarters of a percentage point but the Dept's estimate for the 2009 CPI at 2.5% still looks too high and they do not seem to have allowed for the raft of interest rate reductions that are now likely.

He stayed away from housing for the most part but did lower stamp duty on commercial property, offset by an increase in CGT to 22%, a retrograde move. Dirt was also increased to 23% but unlike income tax, this does not seem to be temporary.

An innovation was BIK on car parking - will be interesting to see the detail as public servants account for up to 60% of all free parking in Dublin. Good emphasis on education and intellectual property with capital spending safeguarded as much as possible. Despite all this, the projected Debt to GDP ratio is up to 43% from just 23% in 2007. How quickly things change!”

Deloitte - - Pension measures announced will disadvantage self-employed

The Minister for Finance Brian Lenihan today announced a reduction in the earnings cap on pension contributions, decreasing it from just over €275,000 to €150,000. This will disadvantage the self-employed and also those who have delayed pension planning until later in life.

Commenting on the change, Ian Mitchell, Managing Partner, Deloitte Pensions & Investment said:
“The measures announced widens the gap for the pension provision that is available to the self-employed versus those who are members of employer sponsored pensions schemes in both private and public sector organisations. This creates an unfair system for those who are self-employed, simply because employer contributions to pension schemes are not similarly restricted.

“Similarly, those earning over €150,000 who have delayed their pension planning will also be caught on the back foot. This points to a need to consider simplifying the system in a similar fashion to the system that has been adopted in the UK, which allows everyone to contribute to the maximum cap irrespective of earnings.”

Deloitte - - VAT increase may be counterproductive

The Minister for Finance Brian Lenihan today announced a 0.5% increase in the standard VAT rate to 21.5%, a move that may not raise the sums forecasted, according to Deloitte.

The increase in the VAT rate would impact on consumer spending and increase costs to businesses without an obvious gain to the Exchequer, it was predicted.

Commenting on the move, Aidan Fagan, Tax Partner at Deloitte said:  “The standard VAT rate has been increased from 21% to 21.5% and this is very unwelcome. Arguably, an increase in the VAT rate in time of negative growth simply saps business confidence and reduces consumer spending.

“Any gains to the exchequer may well be negated by the lower spending. In addition, businesses will have to cope with the cost of amending their accounting systems,”
said Fagan.

IBEC Reaction - Budget 2009

Turlough O’Sullivan, Director General of IBEC said:
“Business recognises the need to take corrective measures to stabilise our public finances. Nevertheless, in the Minister’s efforts to achieve this, IBEC would have preferred a greater emphasis on cutting current expenditure rather than on increasing taxation. We support the moves to stabilise our finances over a three year period.

“It is important that this Budget helps position Ireland to trade successfully, especially after the global economic recovery comes. Therefore specifically, IBEC welcomes the

  • significant capital investment programme;

  • improvement in the Research and Development tax credit scheme;

  • emphasis to increase spending on education;

  • supports for energy efficiency measures in industry.”

“IBEC is disappointed that the government has

  • not more fully addressed the Budget deficit;

  • increased taxation on work, investment, savings and on consumption;

  • not been more determined in its efforts to reduce the public service pay bill;

  • brought forward the payment dates for corporation tax as this could impair the cash flow of many companies in the very difficult current circumstances."

The Assistant Director of the Small Firms Association, Avine McNally has said that the overall thrust of today’s budget has failed to make the strategic alignment that the economy needs at this time. “This budget has increased taxes, fails to reduce expenditure and provides for no public sector reform. It is particularly disappointing that the Minister for Finance has failed to advance any reductions in public sector numbers, while at the same time has increased tax burden on the small business community.”

Construction Industry Federation: The CIF has welcomed a number of initiatives in today’s budget aimed at maintaining employment in construction. The CIF however, also acknowledges that it is a tough budget with taxation measures that will impact spending.

According to Tom Parlon, CIF Director General:  “This is a very tough budget and it includes a range of spending and taxation measures that will impact on consumption within the economy”.

“There are a number of welcome measures in terms of the maintenance of employment within the construction industry although further clarification is needed on some of these measures”.

“We welcome the fact that capital expenditure will be of the order of 5% of GNP and that increased spending in areas such as schools, water and waste water services infrastructure has been announced. However the total is €400m less than last year and we need to see where the cuts are”.

Parlon further stated:
“The reduction in the rate of commercial property stamp duty is a welcome initiative, which will help attract investment into our commercial property stock and which addresses the competitive disadvantage arising from the 9% rate”.

“The CIF does welcome the Minister’s initiative in launching a revised housing loans scheme to be administered by a small number of local authorities on a regional basis countrywide. The scheme will provide for a revised maximum loan for first time buyers subject to loan to value of 92%. The introduction of a proposed equity loans scheme is also welcome subject to sight of the details”.

“These measures should help address the lack of liquidity, whereby first time buyers could not access adequately finance to complete the purchase of their homes. However, we must await the final details on these schemes before accurately accessing their impacts”.

“The increase in mortgage interest relief for first time buyers is welcome and will help further improve the affordability of housing for first time buyers”.

Property consultants CB Richard Ellis generally welcomed today’s Budget saying that it was a very tough but prudent budget that will help sustain and stabilise the economy in the medium term. While surprised by the Government’s decision to introduce a new €200 annual levy on non-principal private residences, the property consultants were particularly complimentary of the Government’s decision to reduce the rate of stamp duty on commercial property from 9% to 6%.

According to Guy Hollis, Managing Director of CB Richard Ellis in Ireland “The commercial property market in Ireland has effectively come to a standstill in the last nine months with potential investors unable to secure funding in the wake of the international financial crisis. Indeed, only €465 million was invested in commercial property in Ireland in the first nine months of 2008 compared with €1.6 billion in the same period last year. Reducing the rate of stamp duty on commercial property to a more equitable 6% could mean that international investors, who have heretofore avoided investing in Irish commercial property, may now be encouraged to invest here.

While a rate of 6% is still higher than the European average of 5% and the UK rate of 4%, we welcome the Government’s prudent decision to amend this tax.  This move will not solve the slowdown in the commercial property sector but it should help stimulate some buying activity. In terms of generating Government revenues, 6% of some transactional activity in the commercial property market is ultimately better than 9% of nothing”

The announcement by the Government to increase mortgage relief for first time buyers who purchased in the last 4 years is welcome and will result in making mortgage repayments more affordable. In real terms, the maximum monthly relief for a first time buyer couple increases from €333 per month to €416 per month (and half this amount for a single buyer) for purchases completed within the last 2 years.

Relief also increases for those who purchased 3 – 4 years ago from €333 per month to €374 (half this for a single buyer). First time buyers who purchased more than 4 years ago will se their current mortgage interest relief unaffected from its current maximum level.

“Increases in mortgage interest relief will provide a welcome break for first time buyers”said  Frank Conway, Director with Irish Mortgage Corporation

For non-first time buyers, the news has been a disappointment. The maximum relief decreases from €1200 per annum to €900 for a couple and €600 to €450 for a single person.
Proposals announced by the Government to offer first time buyers alternative mortgage finance through the local authority mortgage scheme have also been welcomed by Irish Mortgage Corporation.
“The finance proposal put forward in Budget 2008 offer what appears to be a meaningful fall-back for first time buyers who have otherwise experienced problems arranging finance as a result of the ongoing credit crisis” said Conway.
Since the start of 2008, all banks have tightened their lending criteria significantly. And, while many lenders continue to offer up to 92% finance to first time buyers, they have been increasingly selective in who they will approve for a loan. Particularly hit have been first time buyers who may receive certain income types (such as bonus income), individuals who have recently become self-employed and those purchasing certain property types.

Some important support for Foreign Direct Investment in a Budget biased against the consumer - ICAI

Almost no aspect of our tax system was left untouched by the Minister for Finance this evening according to the Institute of Chartered Accountants in Ireland (ICAI). While the focus of comment will inevitably be on the Income Levy, which uniquely is a tax on all earners, our disposable income afterwards will not go as far as it did with increases in VAT and Excise. The increase in the Deposit Interest Retention Tax rate to 23% will eat into the returns earned by individuals on bank deposits.

From a business perspective, the confirmation of the 12.5% rate of Corporation Tax, the reduction in Stamp Duty on commercial transactions by a third, and improvements to Research and Development tax credits will be welcome. In the international context, the Budget business measures will send out a signal to foreign direct investors that Ireland remains open for business. They will however find that Ireland has become a more expensive place than before to recruit and retain workers. It is now essential that the Minister’s indication of further reforms towards developing a high skills economy results in a package of innovative incentive measures for high technology industry.

The benefits of the business package overall will be tempered by the increase in Capital Gains Tax, earlier Corporation Tax payments and wage inflation pressures from the higher personal tax regime.

“As usual, the devil will be in the detail when we see the Finance Bill” according toICAI Director of Taxation Brian Keegan.
“One of the more positive aspects of an early Budget is that we will know the shape of the Finance Bill before the next financial year in 2009”.

An Inflationary Budget which does little for the competitiveness of the SME sector - CPA

The Institute of Certified Public Accountants in Ireland (CPA) today’s Budget has offered little by way of assisting SMEs, the backbone of the economy, to increase their competitiveness against the more difficult global trading conditions, according to Eamonn Siggins, CEO of the CPA. Given the inflationary measures introduced today, it will both render SMEs less competitive internationally and reduce demand for products and services at home. In sum it will militate against economic activity and likely lead to increased unemployment in the sector.

According to Siggins, it was hard to envisage how the inflation forecast of 2.5% would be achieved given the inflationary measures introduced in today’s budget.

“The assumption that inflation will remain at 2.5% is precarious with the introduction of inflationary increases in VAT and fuel prices. These increases will impact every area of the economy. Competitiveness will be hit as a result of the increasing running costs for businesses in Ireland and the burden of these increases will also be felt by consumers”, said Eamonn Siggins. “Petrol prices have already increased significantly as a result of global influences and the increase of 8 cent on a litre of petrol seems particularly harsh and unnecessary”.

“The Minister’s stated aim is to restore order and stability in the public finances, to increase productivity and competitiveness and to protect those who are most vulnerable in our country. He has certainly missed the target with regards to reforming public spending, with few if any Departments hit by decreased spending. He has also failed to tackle waste and productivity issues in public sector and there is no doubt that the real economy is being hard hit to continue to subsidise the public sector” ,
said Siggins.

Related Articles
Related Articles

© Copyright 2009 by Finfacts.com

Top of Page

Latest Headlines
Ryanair revises up full-year profit guidance
AIB bank profitable in third quarter
Ryanair announces half-year profits up 32% to €795m
Ryanair benefits from improved customer service
Ryanair to buy 100 new Boeing 737 MAX 200
Finfacts server migration Thursday
State-owned Allied Irish Banks reports H1 2014 profit as bad loan charges plunge
Ryanair reports profit in its financial first quarter soared 152%
UK firm opens van dealership in Dublin
Ryanair reports 8% fall in full-year profit; US services to commence in 2019
Global Financial Centres Index: New York overtakes London; Dublin slips to 66 of 83 cities
Bank of Ireland reports “significant” improvement in 2013 results
Sale process of IBRC UK projects Rock and Salt completed
CRH says 2014 will be year of profit growth after reporting 2013 loss
Ryanair reports third-quarter loss
Irish Water says it saved €100m in setup costs
RSA Insurance fires two Irish executives for large loss/ accounting irregularities
Bank of Ireland will have to raise provisions by €1.4bn; AIB says it's "well capitalised"
CRH reports slightly improved third quarter
Central Bank says ownership of Newbridge Credit Union transferred to permanent tsb
Ryanair reports H1 profits rose by 1% to €602m
Dublin Web Summit: Irish Stock Exchange and NASDAQ OMX announce dual listing plan
Irish pension managed funds returned to growth during September
Dan O’Brien resigns as economics editor of The Irish Times
Central Bank says no action required on Anglo tapes revelations
Ryanair flew 9m passengers and Aer Lingus carried 1.1m in August
UK Competition Commission says Ryanair must cut Aer Lingus stake to 5%
CRH reports H1 2013 revenue dip and loss
Vodafone refunded UK after discovery of Irish tax haven deal
RBS reports half year profit; Ulster Bank posts reduced loss
Bank of Ireland cuts pretax losses in HI 2013 to €504m
Irish State-owned Allied Irish Banks reports losses of €758m in H1 2013
Service Announcement
Irish managed pension funds declined in June
VHI reports 2012 surplus of €54.3m; Health insurance made loss
Ex- Elan director says management / board "not competent to run a business"
Aer Lingus to put €140m in employees pensions fund; Ryanair apoplectic
Wednesday Newspaper Review - Irish Business News and International Stories - - May 22, 2013
Tuesday Newspaper Review - Irish Business News and International Stories - - May 21, 2013
Ryanair, Europe’s biggest low cost carrier, announced Monday record annual profits of €569m - - up 13%