10 Oct 2018 | 12.30 pm
Budget 2019: Overview And Insight From KPMG
Budget 2019 is a mixture of tax increases and modest tax reductions
10 Oct 2018 | 12.30 pm
Budget 2019 helped disburse some of the fruits of the improving economic conditions, says Conor O’Brien (pictured), Head of Tax and Legal Services in KPMG
Budget 2019 was introduced by the Minister for Finance against the backdrop of a remarkable Irish economic performance in recent years. Having endured a serious economic downturn as a result of the property market crash 10 years ago, Ireland is now enjoying robust economic growth, reaching full employment and ending government borrowing. It is a tribute to the sure-footedness of Irish policy makers, and to the discipline of Irish citizens, that this has been achieved.
Budget 2019 sees the distribution of some of the fruits of improving economic conditions, mostly in the form of increased government spending. On the tax front there is a mixture of tax increases and modest tax reductions. The tax relief measures include:
- A reduction in the 4.75% rate of USC to 4.5%;
- An increase of €750 in the standard rate income tax band;
- An increase in the home carer tax credit by €300;
- An increase in the earned income tax credit by €200.
The tax-raising measures include:
- An increase in the VAT rate applicable to tourism related activities from 9% to 13.5%;
- The second of three 0.1% increases in the rate of Employer’s PRSI, via an increase in employer contributions to the National Training Fund;
- An increase in betting duties and tobacco-related excise duties.
The government has again reaffirmed its commitment to Ireland’s 12.5% corporation tax rate — Ireland’s commitment in this regard has been rock solid for many years.
This year’s budget confirms that the corporate ‘exit tax’, which Ireland has committed to introduce under EU law, will be levied at the 12.5% rate. Ireland’s corporation tax regime remains attractive and remarkably stable.
There will be some disappointment that this budget follows a pattern of previous budgets by failing to include any substantial measures to improve the competitiveness of Ireland’s tax regime for international mobile talent or domestic entrepreneurs.
Both of these groups are relatively mobile and the evolution of the international tax landscape is likely to make it increasingly important to attract them to — and retain them in — Ireland. This would also act as a hedge against any downturn in foreign direct investment, of which, historically, Ireland has been a significant beneficiary.
It is to be hoped that future budgets might include measures to improve existing capital gains tax regime for entrepreneurs and the Special Assignees Relief Programme applicable to inbound workers, as well as measures to reduce Ireland’s relatively high marginal rates of income tax.
This would complement our competitive corporation tax offering and encourage Irish businesses with Irish-based owners.
+ Download KPMG’s guide to the tax implications of Budget 2019 here.