Ireland's Budget 2020

The Minster for Finance gave his Budget 2020 speech from 1pm to 2pm today, 8th October 2019. Budget 2020 was essentially focused on the dual purposes of raising taxes and allocating spending with a view towards the impacts of Brexit and Climate Change issues. The main points of note were:

Tax Increases

  • The rate of commercial stamp duty increased from 6 per cent to 7.5 per cent from midnight tonight
  • Stamp Duty of 1% to apply to a scheme of arrangement where a ‘cancellation scheme’ under Part 9 of CA2014 measures is used for the sale of a company
  • An increase of 50 cent in excise on cigarettes
  • Carbon taxes to be increased by €6 per tonne, which is expected to raise €90 million for the exchequer (expected to increase from €20 to €80 per tonne by 2030);
  • Nitrogen Oxide emissions-based charge for all newly registered cars from 1/1/2020 at €1 per mgkm
  • An increase in the rate of dividend withholding tax – which is paid directly by companies to the Revenue in lieu of tax owed by their shareholders. The current 20 per cent rate is rising to 25 per cent from 1 January 2021. A modified DWT regime will apply from this date.
  • Rate of Bank Levy to increase from 59% to 170% of DIRT payments from midnight tonight

Tax Regime Changes

  • Transfer Pricing legislation to be updated to include recommendations in the Coffey Review and to extend to SME’s
  • Anti Hybrid Mismatch rules to be written into the Irish tax code from 1 January 2020
  • New anti-avoidance measures targeted at IREF’s to be brought into effect from midnight tonight
  • Targeted amendments to REIT regime to be introduced from midnight tonight to increase tax take from these entities

Tax Credits/Allowance Increases

  • KEEP to apply to company group structures and to be extended to family companies
  • EIIS
    • full income tax relief to be allowed in the year of investment
    • personal investment limit to be increased to €250k pa from €150k pa currently
  • R&D tax credit
    • Credit increased from 25% to 30% for Micro and Small Companies
    • Micro and Small Companies can claim credit on pre-trading expenses to offset against VAT and payroll taxes
    • limit of qualifying R&D to be outsourced to qualifying universities increased from 5% to 15%
  • Special Assignee Relief Programme (SARP) and Foreign Earnings Deduction (FED) extended to 2022
  • CGT entrepreneur’s relief to remain as is, but review ordered to assess how to maximise benefits for entrepreneurs
  • The home carer tax credit rose by €100 to €1600
  • The self-employed tax credit increased by €150 to €1,500
  • The Inheritance and Gift tax Group A threshold is increased by €15,000 to €335,000 from 9th October 2019

Brexit

  • A Brexit contingency fund of €1.2 billion is to be created, not including an additional fund of €650 million loan funding that can be borrowed in the event of a no-deal Brexit; the main points being:
    • €200m to increase staffing and upgrade ports and airports
    • €110m focused on sectors most exposed (Food/Manufacturing/Internationally Traded Services)
    • €85m for Beef €14m for Fisheries and €9m for Agri Food Sectors with an additional €40m for Tourism sector
    • Funding to focus on regions most affected by No Deal Brexit €365m for extra social protection (job losses etc) and €14m for labor transition

Economics

  • Unemployment rate has fallen to 5.3% from a high of 16.6% in 2012
  • €40.7bn in tax revenues collected to end Sept, €56.5bn expected for full year 2019
  • GDP growth expected to be 5.5% in 2019
  • Economy expected to grow by 0.7% next year, even taking into account a disorderly Brexit, however for prudence the Department of Finance is contingency planning for a contraction of 0.6%

Climate Change

  • Carbon taxes to raise €90m which will be ringfenced for climate action programmes
  • BIK exemption for electric cars to be extended
  • €5m for peat rehabilitation to support bio-diversity community lead programmes
  • €3m allocated to additional electric vehicle infrastructure – to double Ireland electric vehicle charging points among others

Other items of note

  • €2.5bn to be allocated to Housing Programme in 2020
  • €2.7bn to be allocated to Dept of Transport, Tourism and Sport
  • €2bn to be allocated to Education

    Partners

  • Mark Gorman
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  • Aisling Donohue
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