Michael Noonan introduced Budget 2016 in a backdrop of an economy that continues to rapidly recover from a recent economic and fiscal crisis, announcing a package of taxation and spending measures of €1.5bn that will aim to assist this recovery and growth in a sustainable way. In comparison to Budgets delivered since 2009, Ireland now finds itself as the fastest growing economy in Europe in 2015, creating 1,100 jobs per week, and this positivity was reflected in the package of announcements.

From an international perspective, the Minister took the opportunity to point out Ireland’s good position to compete for investment in the new international platform, with a corporation tax system that is transparent and statute based. The Minister also publishes an updated on our International Tax Strategy which will deal with how Ireland will continue to engage with the OECD’s BEPS reports and the emerging EU tax agenda. To enhance transparency, the Minister announced the introduction of country by county reporting, in line with OECD recommendations. Most importantly, the Minister reaffirmed Ireland’s commitment to the 12.5% rate. An extension was also announced to the corporation tax start-up exemption until 2018, and this will be welcomed by entrepreneurs and smaller scale FDIs.

As flagged in last year’s Budget speech, the Minister announced the introduction of a new Knowledge Development Box, which will provide a reduced corporation tax rate of 6.25% for the exploitation of certain intellectual property. This measure is a significant boost to the knowledge economy, and along with the R&D tax credit and intangible asset regimes, will ensure Ireland remains to the fore as an international location for investing in and developing IP.

Much focus was on sustaining growth in the domestic economy with a range of measures across a number of sectors. An earned Income Tax Credit of €550 is being introduced to better the position of the self-employed, while a reduced Capital Gains Tax rate of 20% will apply to the disposal in whole or in part of a business up to an overall limit of €1m in chargeable gains. While this measure falls short of a reduction in the rate of 33% to benefit all, this measure is welcome in boosting activity in the SME sector. An expansion to the funding limits from €5m to €10m for the Employment and Investment Scheme was also announced, which is welcome in a climate where funding is still an issue for the SME sector. In a boost for the construction sector, the Minister announced that the National Asset Management Agency is to fund the construction of 20,000 new homes over the next four years.

The retention of the 9% VAT rate for the hospitality and tourism sector was confirmed; the extension of existing stock reliefs for farmers was announced; a transition to upfront excise relief for micro-breweries and the extension of the cap on eligible expenditure to €70m for the film tax credit was announced. The latter is a significant boost for the film sector and should attract increased FDI.

Finally, cuts were announced to all three levels of the Universal Social Charge, the top rate will reduce from 7% to 5.5% for income earned in excess of €18k and up to €70k. The 3.5% rate will reduce to 3%, for income earned between €12k to an increased threshold of €18k, while the 1.5% applying to income on the first €12k will reduce to 1%. These cuts reduce the marginal rate of tax to under 49.5% for all earners under €70k for the first time since 2009. An undertaking was also given by the Minister to progressively abolish the USC.

This is a positive measure, and one that will benefit all individuals. The current marginal tax rate of 52% or 55% for self-employed individuals is a significant impediment in attracting FDI and the repatriation of the diaspora, and a commitment to abolish this much loathed tax will be welcomed by all.

In summary, the taxation and spending measures represent a solid package of measures in facilitating further economic recovery and growth across all sectors of the economy.