Budget 2015 – Glimmers of Light?

Ireland’s first budget since exiting the EU/IMF bailout will be announced on 14th October 2014 and, in a departure from the recent austerity budgets, there is cautious optimism that some tax relief might be in sight.

In addition to the desired changes to the EIIS scheme the areas in budget 2015 that we will be watching include:

  • INCOME TAX RATES. Possible changes to bands, tax credits, PRSI and the dreaded USC! Ireland is currently ranked ninth highest in the world in relation to its marginal tax rate on wages in a survey of 34 OECD countries. Consumers need to see an increase in their net wages to encourage spending.
  • PRSI RATES. Self-employed persons are subject to higher PRSI rates than employees (on incomes above €100,000) and they are not entitled to claim the €1,650 PAYE tax credit applicable to employees. Self-employed persons would hope to see this disparity addressed in Budget 2015.
  • DIRT: The increase in the DIRT rate to 41% didn’t seem to have a huge impact on spending, hopefully the Government may look at cutting the DIRT rate – it was as low as 20% in 2008.
  • PROPERTY: Many property-based incentive reliefs will be guillotined at the end of 2014 as a result of previous Finance Act changes. While the impact of this will be widely felt it is not expected that Budget 2015 will include any changes here.
  • CGT: The CGT exemptions for assets purchased by 31 December 2014 and held for seven years is not going to be renewed in Budget 2015 and therefore any asset purchases in the pipeline should be concluded before 31 December 2014.  The 80% windfall tax on re-zoned land may also be removed.
  • CGT/CAT RATES: Currently at 33% (up from 20% in 2008) uncertainty exists as to what direction these rates may take going forward. Ideally they would be reduced to take account of increasing asset value but that is in the hands of the Minister.  
  • CAT THRESHOLDS: These have been falling steadily since 2008 in line with falling asset values. Again the hope here is for an increase in line with recent uplifts in asset values.
  • VAT: The 9% VAT rate applicable to the hospitality sector may be extended to the construction industry to help incentivise that sector.