Wednesday, October 09 12:33:07
There have been - so far - no leaks as to what's in next week's Budget for business but there could be a couple of tax sweeteners there to boost employment.
A major issue is how to effectively use tax policy to encourage domestic and foreign investment in Ireland. Commitments have been given at home and abroad that the 12.5pc corporation tax rate will remain and this is crucial to Ireland's attractiveness as a location for doing business.
Aidan Byrne Taxation Partner, Baker Tilly Ryan Glennon said that, while the suite of measures introduced as part of the Government's Ten Point Reform Plan in 2012 was welcome, they have not addressed some of the key issues facing Irish business including access to finance.
A targeted tax relief to assist entrepreneurs start up and grow their businesses, thereby generating employment and tax revenue would be welcome, he said.
"However, given the political pressure when welfare cuts are being introduced concurrently, such measures seem unlikely. One such measure which could go some way to assisting business would be a review of the operation of the Employment and Investment Incentive Scheme (EIIS), potentially allowing full tax relief for investors in the year that the investment is made. This could go some way to alleviating the issue companies' face regarding raising finance and cash flow control," said Mr Byrne.
During 2013, the Government undertook a substantial review of the operation of the current tax credit regime. "Such a review is welcome and is it important to constantly assess our system's attractiveness in comparison with our main international competitors for R and D investment. The R and D credit remains a critical part of both our FDI offering and our system of tax supports for innovative domestic enterprise," said Mr Byrne.
As the saying goes, nothing can be said to be certain in life only death and taxes and unfortunately, there will certainly be tax increases in the forthcoming Budget.
On 15 October, Michael Noonan will deliver Ireland's seventh austerity Budget since 2007. The area of Personal Taxes has been subject to significant increases in recent austerity Budgets seeing an increase in Standard Rate Bands, a decrease in Tax Credits and a widening of the tax base for USC and PRSI exposure.
"Substantial further increases in this area are unlikely as the average taxpayer has little left to give and any further taxation on labour will significantly impact on job creation, a key cornerstone of government policy. There is potential however that Minister Noonan will cast the net of PRSI and USC wider to remove some remaining anomalies and ensure these taxes are applied on a wider basis," said Mr Byrne.
A universal measure in line with the introduction of the property tax last year and designed to target all tax-payers is most likely what Minister Noonan will strive to achieve, rather than focusing on high net worth individuals only. "He may also seek to target an increase in the tax rates applying to investment products such as insurance policies, investment funds and we may see a hike in the DIRT rate to 35pc," said Mr Byrne. Again, recent austerity measures have seen an erosion of the generous Capital Taxes regime in place up to 2009. "The rate of tax for both CAT (Capital Acquisitions Tax) and CGT (Capital Gains Tax) now stands at 33pc with an increase to 35pc widely anticipated. Alternatively, Minister Noonan may emulate the regime of neighbouring European countries and seek to raise inheritance tax to 40pc while maintaining the rate of 33pc for gifts bestowed. This would serve to incentivise lifetime planning with the lower rate of CAT, while the tax yield on estates passing upon inevitable death will increase" said Aidan.
The likelihood of targeting income for the Exchequer from pension policies is almost certain, given that projected target yields from pension changes were not met in 2013, he added.
"Furthermore, there is a possibility of curbing the maximum tax free pension lump sum available at retirement (currently E200,000) and the prospect of introducing a new pension levy to meet the costs of supporting insolvent pension schemes," said Aidan Byrne.