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BUSINESS LEADERS HAVE been elbowing each other the past few weeks for a piece of the billion-euro fiscal breathing space earmarked for Budget 2017.
Ministers Michael Noonan and Paschal Donohoe have set aside a third of that amount for tax cuts, with the rest expected to go on spending increases.
The minority government faces the tricky challenge of weaving its proposals through the Dáil with as little drama as possible despite the differing agendas of both the independents and Fianna Fáil.
For that reason, political pundits anticipate a load of calculated decisions with a strong focus on the housing crisis and other social issues like university fees.
On the business side, “Brexit-proof” incentives will be rolled out to encourage entrepreneurship and to keep Ireland attractive for foreign direct investment.
Here are some of the key talking points in business circles ahead of Noonan and Donohoe’s announcement on 11 October:
Capital gains tax
Entrepreneurs are hoping to see a reduction in the capital gains tax, which is chargeable on the sale of assets such as all or part of a business.
The Programme for Government promised to match the UK’s rate by reducing the current charge from 33% to 10% and raising the cap on qualifying gains from €1 million to €10 million.
The Small Firms Association said that the current rate puts Ireland at a competitive disadvantage when it came to businesses attracting funding, while the Irish Stock Exchange said a reduction would bring Ireland in line with international norms.
Dublin’s commissioner for startups Niamh Bushnell echoed those claims in her pre-Budget submission.
Pundits expect the government will follow through with this proposal as it falls in line with its “Brexit-proof” policy of discouraging young businesses from migrating to gain the advantage of Britain’s more attractive scheme.
Excise duty
Unsurprisingly, the alcohol lobby has been vocal in its call for the government to cut the excise duty tax on their products.
Jonathan McDade, head of the the Irish Brewers Association (IBA), previously told Fora that the measure has been a “hindrance in terms of growth, innovation and investment” for brewers in Ireland.
He claimed that a reduction would lead to job creation in the brewing sector.
Wine makers were also critical of the tax, which has remained at €3.19 per €9 bottle of wine since 2014.
Michael Foley, chairman of the Irish Wine Association (IWA), echoed McDade’s claims that a lower rate would create employment.
The IWA also claimed that excises were damaging Ireland’s tourism industry because the price of alcohol was one of the reasons why tourists said they wouldn’t return to the country.
However despite cries from the industry, the government is highly unlikely to reduce the booze tax in this year’s Budget. The best businesses in this sector can hope for is that the rate doesn’t go up this time around.
Diesel
It’s pretty much a given that, like the cost of cigarettes, excises on diesel will be jacked up in the budget, with prices in the Republic currently below the average rates for Northern Ireland.
The Irish Road Haulage Association, which represents lorry drivers, argued that end consumers would be hit as the cost of transporting goods would increase – trucks only run on diesel fuel.
Speaking to Fora after the launch of a same-day delivery service, John Tuohy, chief executive of Nightline delivery company, which runs its own fleet of vans, said that he would be “keeping an eye to make sure that excise duty on diesel doesn’t increase too much”.
However, similar to other consumption taxes, the best firms with commercial vehicles can realistically hope for is no change on 11 October.
Tourism VAT rate
Ireland’s booming tourism trade – which saw the number of inbound trips to the country increase almost 11% between June and August – is keen to maintain its preferential 9% VAT rate.
Introduced in 2011 as a measure to boost activity in the hospitality sector, the lower rate was due to be phased out at the end of 2013 but has since been ‘extended indefinitely’.
The programme for government stated that the rate would be retained “as long as prices remain competitive”.
Critics have argued that this is no longer the case, especially in Dublin, where prices continue to increase as occupancy levels remain sky-high.
The Irish Tourist Industry Confederation said retention of the VAT rate is “vital to the regional spread of tourism”, with its chairman Paul Gallagher calling on the government to “continue pro-tourism policies”.
These arguments have been backed by the Restaurants Association of Ireland (RAI), whose members also benefit from the tax break.
RAI argued in its pre-budget submission that the food industry is experiencing an unequal recovery, “where a divide remains evident between business in the capital, urban areas and rural Ireland”.
The finance minister’s own department has argued that a return to the 13.5% rate is due, stressing that the temporary initiative has “done its job”.
“The general recovery of the economy and increasing prices in the sector raises questions about (the VAT rate’s) future,” a briefing note to the minister said.
Noonan himself has already acknowledged that the case for retaining the 9% rate for the capital’s hotel sector is diminishing each year, though he added “retention of the measure for the rest of the country remains” as many regional hoteliers have yet to return to a profit.
Meanwhile, the Irish Congress of Trade Unions has claimed that the special rate does little to help the sector’s low-paid workers while costing the taxpayer €620 million every year.
The government is under enormous pressure from lobbyists in the hospitality sector to maintain the current rate, even though the industry is thriving.
It would be a controversial move to reverse to the higher rate, so odds are that Noonan will choose to keep the peace for another year and ignore his own officials.
Self-employed
The self-employed are hoping to have their tax bills brought in line with PAYE workers through increased tax breaks and access to PRSI benefits.
At present, the entry point to PRSI for the self-employed is €5,000 each year, compared to €18,000 for employees, resulting in a higher tax rate for both low- and high-earning self-employed people.
Right now, the self-employed pay 4% PRSI on their income, but can’t claim jobseeker’s benefit or sick pay, although they are entitled to jobseeker’s allowance as well as materity benefit and a state pension.
In its pre-budget submission, the Small Firms Association recommended that social protection benefits should be extended to the self-employed.
ISME, the body that represents small businesses in Ireland, called for a “total end to tax discrimination against the self-employed”.
Former chief executive of ISME, Mark Fielding, who stepped down on Friday, said: “Ireland needs to grow its own entrepreneurs. We need to use our tax system more effectively to draw on the increasingly large pool of Irish-born managers, skilled professionals, and entrepreneurs working both at home and overseas.”
At the announcement of the last budget, Noonan promised to “end the unfair treatment of the self-employed” and said that as resources became available, the government would “complete tax equalisation” for those that fall into this bracket.
From the start of this year, the self-employed were given a €550 tax credit – still €1,100 less than the amount PAYE workers could claim against any income.
It is thought that this tax credit will be increased in Budget 2017 as the government makes a move to bring tax breaks for the self-employed closer in line with those available to regular employees, although full equalisation isn’t likely to come this time around.
Written by Conor McMahon and posted on Fora.ie
Ireland… The best little country in the world to screw the self employed…
The best country in the world to be a politician
Having Noonan in charge of Finance is like having a fox in charge of a hen house. .
If they do away with usc they will increase lpt dont be so naive the banks were guaranteed.
Having 1000 plus children in hotel rooms B and B ect and having an 85 year old woman pass away after 2 days on a trolley should be addressed first !!
Take the 13 Billion from Apple or whatever the government can get at this stage and put some prosperity back into Ireland.
What a load of useless wasters the above people are. Half a billion for the total budget for Ireland.A fiver for the old age pensioners……
Waffle waffle waffle.
Don’t forget drag the Apple debacle out for another five years while the people of Ireland struggle because of Noonan.
Are you really so naive to think that Apple will just hand over 13 billion to the Irish government and then continue happily employing the thousands of people nationwide?
Cathal how long would it take for apples workforce to pay €13bn in tax? There are I think 6,000 of them.
Let’s not be fooled here. It’s not a billion euro giveaway. It’s a 3 billion euro giveaway. That’s how much government spending is increasing over the past year. Why the difference? Because the other 2 billion is eaten up by government “commitments”, ie increases in public sector pay and more money into the black hole health budget, most likely eaten up by consultants fees. The 1 billion is what is left to “play with”.
Imagine we had not increased public sector pay this year. We could pretty much half the USC in a single year. The government is using and abusing the middle class and private sector who create the wealth by retaining the USC to feed the insatiable public sector, welfare recipients and health consultants.
Yea your right lets knock teachers, nurses and gardai pay down to minimum wage…that will surely attract the best and stop them emigrating to Dubai etc!!
@Eoin McDonnell:
Eoin if we had halved the USC instead of giving pay rises, the nurses, guards and teachers would have benefited too.
@ Fred totally agree
Not too mention the scroungers year after year on the dole
It’s not an increase in public sector pay.. Its a very partial restoration of pay and then only for certain grades !
I don’t know anyone in the public sector who has had a pay rise, I know the younger more vulnerable members have had ONLY A FRACTION of their pay RESTORED but nope no pay rises I am afraid…
@Eoin McDonnell:
“Restore” to what? 2008 levels? Based on tax revenues from an unsustainable property bubble? Have a think about that.
You have no moral right to 2008 levels of pay. We couldn’t afford it then and we can’t afford it now, they use the USC to pay for it.
@Karl: Yes but a cut to USC benefits all workers across all sectors.
Fred yes if the ps didn’t get a pay rise you could cut usc. How much inconvenience do you think the resulting strikes would cause you. Public sector workers are running out of patience as it is. They won’t take much more bs.
Yes Fred but that would not be what we were promised. We agreed to a temporary pay cut to help us get out of a tight spot. We are out of that spot apparently so pay us. Keep the recovery going ;)
@Fred Johnson: Thats short sgihted public private nonsense , it was some wealth created there in the 2010 when the Troika landed to convert private to sovereign debt. The public service shouldered it on the double pay cuts, usc and Fempi as well as no budgets to properly complete jobs. This was right and fair.
Public workers now continue to pay USC , pay reductions and the emergency reductions in FEMPI, so roughly double your USC that’s what comes out of a nurse,garda,firefighter,civil servant pay cheque. You would swear a public servant lives in a different economy or eats a different type of bread and their kids automatically have storks delivering uniforms and football boots. So when Dublin Bus gets 12% Luas workes 18% , these people are completing with public servants among others in the housing market.
Seriously consider inviting Apple/Google/Pfizer here and saying to them unfortunately we have no Gardai working today so the army is on the streets but its not as bad the hospitals were closed last week. No investment. The jobs these people do are real jobs and necessary job roles in a functioning society. We’re all in this little place together and truth is without foreign direct investment we’d still be a basket case economy and without stability you can’t have that.
It’s not a giveaway. It was our money before the government forcibly took it from us. At most, it’s the Mafia boss sending us a wedding present after years of running a protection racket.
@Ben McArthur: Who are the government….a foreign power???
@Get Lost Eircodes: They are the proxy of foreign powers such as the IMF and the EU. They have no loyalty to the Irish people, that’s for sure.
Racketeers who have acquired the veneer of legitimacy by pretending every so often that we have the chance to throw them out. If politics stopped tomorrow, the real government would continue. Look at Belgium, who supposedly had no government for over a year. Does anyone think it really made any difference?
First priority will be the golden circle closely followed by the gombeens, cronies and sleeveens.The only difference the ordinary punter will notice is the increase in government advertising/self promotion in the poddle like media,
Sew up your pockets, Jabba the Hutt wants to remove the contents and turn them inside out .
“incentives will be rolled out to encourage entrepreneurship”. I fell off my chair reading that and I’m sure I’m not the only one. After the way small business has been treated for years anyone with sense will go elsewhere with their energy, brains and passion to start a business. Ireland exports its young qualified people and its potential indigenous businesses. When the multinationals all go to China or somewhere what will there be left here? Just fat politicians on massive pensions who will tell us it’s our own fault.
29,000 sign on Change.org petition for Reform of the daft Irish Motor Tax system … €280 for new Merc … €580 for 10 yr old 1.6L … the most regressive unfair motor tax system in the EU. poor subsidising the rich … a disgusting society to live in.
Pre-budget submission made to Dept of Finance on behalf of 29,000 signatories …. 87,000 visited the Change.org site.
I’d have no problem with self employed receiving more tax credits but they cants prove their income. Can other employees claim expenses and vat back too?
Free the Journal 50
@now-now-now:
Haha. Let the cat out.
Powerabbey
Sep 19th 2016, 10:15 AM # 33 1
Free the Journal 50
@LITTLEONE: You can see Dane’s hand writ large all over the comments section, every now and again he trips himself up. It must be hard for the most profilic profile maker to keep track of them all, especially in between driving lessons, I just hope the haste is not him texting whilst driving..:)
Free the 50 accounts
@now-now-now: Are they that bad at buying a round?
Ah sure Ireland’s a wash with money no other country can afforded to turn down € 13 billion in un-payed taxes. There will be at least a fiver for everyone in the audience.
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