13 Oct 2021 | 10.21 am
Budget 2022: Overview And Insight From KPMG
Focus on pandemic recovery and cost of living
13 Oct 2021 | 10.21 am
KPMG partner Tom Woods (pictured) summarises the overall thrust of Budget 2022
Budget 2022 was introduced by the Minister for Finance with the stated aim of investing in our future, of meeting the needs of today, while putting the public finances on a sustainable path. Last year, the Budget was shaped by the risks posed by Brexit and Covid-19.
This year the focus turns to the final stages of the Government support for the pandemic recovery, restoring public services and living standards, and repairing the public finances.
In summary, the tax measures announced were €0.5 billion of an overall budgetary package of €4.7 billion. To deal with the continued impact of Covid-19 on certain sectors of the economy, the minister announced the welcome extension of both the Employment Wage Subsidy Scheme (EWSS) until 30 April 2022, and the reduced VAT rate of 9% for the tourism and hospitality sector until 31 August 2022.
The minister emphasised the importance of tackling both housing and climate change, and supporting entrepreneurs and the wider business community as the core missions of the current Government, which can be seen in a number of the measures announced including:
- The extension of the Help-to-Buy scheme to the end of 2022
- The extension of pre-letting expenses for landlords to the end of 2024
- An increase in carbon tax of €7.50/tonne
- A tax disregard of €200 for personal income of households who sell excess electricity back to the grid
- Extension of, and amendments to, the accelerated capital allowances scheme for energy efficient equipment up to the end of 2024
- Extension of, and improvement to, the Employment Investment Incentive (EII) scheme for a further three years
- Extension of the relief for certain start-up companies up to the end of 2026
- Subject to European state aid approval, the introduction of a new tax credit for digital games to support to the design, production and testing of a digital game.
The minister outlined the importance of the Government’s decision to join the OECD international tax agreement in ensuring the minimum effective rate of tax for companies with revenues more than €750 million was set at 15%. This rate will apply to approximately 1,500 companies once introduced. The minister in turn reinforced the commitment to the 12.5% rate of corporate tax for companies operating here.
As expected, some small changes were announced in relation to the income tax standard rate band and income tax credits, along with some minor amendments to the USC bands. The minister also announced an income tax deduction for remote working of 30% of the cost of vouched heat, electricity and broadband to support remote working.
The total budgetary package of €4.7 billion was based on the Summer Economic Statement which forecasted a combined deficit of €34.5 billion for 2021 and 2022.
Based on recent economic activity, this deficit is now forecasted at €21.5 billion, which represents a reduction of nearly 40%. Despite improving public finances, the budgetary package did not change.
Recognising that our debt level needs to be managed, it is hoped that there will be investment in more measures to maintain our attractiveness to inward investment and entrepreneurs in the coming year.
Pic: Patrick Bolger