RSM Ireland

Budget 2015 analysis

A Prudent Budget – Steady as She Goes

Aidan Byrne, Taxation Partner with RSM Budget 2015 analysis.

Michael Noonan has introduced a budget today which he described as being about securing the recovery, building for the future and broadening it to families across the country.

In a wide ranging address he outlined some key areas which are designed to assist in the recovery and target certain areas which could give momentum to the reduction in numbers of unemployed. On the international tax front, as had been expected, he announced the phasing out of the Double Irish tax structure by 2020 for existing users of the strategy and from 1st January for new company.

Aidan Byrne, Tax Partner with  RSM commented “Interesting that, leaving it open until 1st January, there might be some activity in this area over the next few weeks. The important points from this element of the speech were the confirmation that the 12.5% rate is here to stay, the introduction of a Knowledge Development Box which will be similar to other schemes in other jurisdictions. Even though the name suggests it won’t be limited to patented activities, something which some of our competitor countries have done. These tend to be limited in scope and not overly attractive in a world where patenting has become less common. Changes also in the R&D regime, our IP regime and in SARP, details of which will be contained in the Finance Bill shortly”.

In relation to changes in the indigenous economy there is more of what has been in earlier budgets. The Minister is approaching tax changes on a sector basis with mention of the Agri and Marine sector and the Irish Film sector. “Many changes, were made in the Farming taxation provisions, the main thrust of which is to move farmland to those who are likely to drive more produce from that land, benefitting from the end of Milk Quotas. A review of the Blue Economy is also to be undertaken with measures to be introduced with a view to doubling the sector by 2030” Aidan continued.

In relation to the tourist sector, the 9% VAT rate will continue to apply, with a warning that rising prices will lead to its abolition. The Private Rental sector was also given a boost with the Home Renovation Scheme extended to houses in that sector where landlords are paying tax on the rental income arising.

On the SME sector the issue of funding was addressed through announcing that the Strategic Banking Corporation of Ireland, which is expected to be formally launched at the end of this month, which will increase the availability of loans of longer duration coupled with more flexible conditions and potentially at lower cost. It was also stated that the Permanent TSB will again enter this market. This issue of funding is a key concern to our clients and is holding back investment in key, employment creating elements of the economy.

Measures around stimulating the social property sector were introduced by Brendan Howlin and this will have both an impact on employment (and hence tax revenues) but also socially where the scourge of homelessness needed to be radically addressed.

Finally there was some relief on the personal taxation side, with those earning employment income below €70,000 and those in self-employment with earnings of below €100,000 benefiting from reductions. “In a smart move, to no doubt avoid being accused of introducing changes which benefitted those on higher earnings, those benefits which would normally pass up to those on higher earnings were negated by an increase in the USC. It will be interesting to watch this space over the coming budgets. A marginal rate of 52% for employees and 55% for self-employed in a major dis-incentive for wealth creators in the economy” concluded Aidan.

All in all, a balanced and prudent budget which will assist in the continuing recovery of the Irish Economy.

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