11 Oct 2019 | 12.30 pm
Expert Reaction To Budget 2020
'The carbon tax is an eco-austerity measure'
11 Oct 2019 | 12.30 pm
Duncan Lyster, Lisney
“Today’s increase means that commercial property stamp duty has now increased 275% since October 2017; moving from 2% prior to Budget 2018 to 7.5% from tonight. The Irish market has traditionally been known for being relatively transparent and easy to transact in. This change will be seen as a measure that reduces liquidity and investor sentiment. It brings with it an added uncertainty.
“We are now seven years into this property market cycle and the decision to increase commercial property stamp duty is a very unwelcome intervention in the market. Stamp duty, as we saw in the last decade, is not a sustainable source of tax revenue as activity is likely to reduce as the cycle comes to an end. This measure may accelerate the end of this cycle.
“This measure will be seen by many investors who are in the process of selling or considering selling to benefit from the capital gains tax exemption (introduced in Budget 2011) as a form of clawback on the gains made.”
Louise Kelly, Tax Partner, Deloitte
“The changes to Irish Transfer Pricing rules referred to in Budget 2020 will represent a significant shift in the law. They will create work for Irish taxpayers who must now assess their pricing in light of the revised rules. Concise guidance and continued engagement with stakeholders on these changes will continue to be vital in order to ensure taxpayer certainty and the effective operation of these new rules.”
Marie Hunt, CBRE Ireland
“The commercial property sector is disappointed that the rate of stamp duty on non-residential property transactions has been increased yet again. Unexpectedly increasing transaction costs is clearly unwelcome considering the reputational damage such changes make for institutional investors who already bore a trebling of this rate only two years ago. This increase in stamp duty will certainly have a bearing on investors’ decision-making, not least the price they will bid and pay for commercial real estate assets from this point forward.”
Frank Mitchell, Irish Tax Institute
“It is gratifying that the minister has listened to what the Institute and other stakeholders have been saying about measures such as the Key Employee Engagement Programme (KEEP), the Employment and Investment Incentive (EII) and the R&D Tax Credit. However, the failure to raise the €1m lifetime limit on CGT relief for entrepreneurs leaves us exposed at a critical time for Irish business.
“While we are encouraged by the broad outline of the changes announced in the Minister’s Budget Speech, we will be watching out for the detail in the forthcoming Finance Bill. It is important that we get these changes right because there have been some false dawns and time is of the essence for our SME sector.”
Robert Troy, Fianna Fáil
“Fine Gael have once more failed to meet their commitment under their Programme for Government for full equalisation for the self-employed with the PAYE credit by 2018. Full equalisation is a core Fianna Fail policy, which we will continue to drive forward, along with providing full social protection supports to the self-employed.
“Disappointingly, competitor nations will still have an advantage when it comes to incentivising SME startups and scaling up. The government have failed to make any changes to Entrepreneurs CGT, which puts Ireland at a competitive disadvantage. The UK will still have a far more attractive CGT relief for entrepreneurial gains of up to £10m, far in excess of the €1m Irish limit. Despite the changes in this budget, the UK’s EII scheme will also be vastly superior.”
Joe Cunningham, SIPTU General Secretary designate
“Workers paid for the banking crisis and the budgetary crisis. Now it seems our members and other workers are expected to pay for Brexit and the climate crisis. In our view the budget is muddled, contradictory and regressive.
“Unless there is strict accountability, the Brexit fund promised in the Budget 2020 could become a massive handover to employers. All the stakeholders – employees, employers and the State – must be involved in the design, monitoring and evaluation of any spending from this fund. It is crucial that ‘good faith employers’ – those employers that participate in, and abide by, the state’s industrial relations machinery – be given particular preference.”
Austin Hughes, KBC Bank
The continuing inability to set out credible public spending plans remains a key feature of the budgetary process. For example, relative to the spending plan for 2020 set out three years ago in Budget 2017 documents, day to day spending in 2020 is now expected to be some €3.3 billion higher. In the same vein, the projected three year increase in health spending out to 2021 envisaged in last year’s budget documents was some €398 million, a figure that is only marginally above the €335 million overrun in 2019 for which a supplementary estimate is now included for the current year.
In uncertain times, it is inevitable that public spending plans have some elasticity. However, the consistency and scale of spending overruns in health and elsewhere makes it almost impossible to establish medium term trajectories for public spending and taxation.
Conor Faughnan, AA Director of Consumer Affairs
“Government have cynically taken advantage of the climate crisis to justify a tax increase, instead of outlining measures which would actually lead to reductions in our carbon emissions. Investing in public transport infrastructure, LUAS like systems across our main cities, quality cycle lanes, all these measures would do far more to get people out of the car than a tax increase ever will. The moved to NOX-emissions based charging will help to close the gap in terms of the cost of a new car versus a second-hand UK import, which is one of the main issues facing efforts to make Irish transport cleaner.”
Sven Spollen-Behrens , Small Firms Association
“Budget 2020 will further increase business costs for small firms with the decisions to raise Carbon Tax and commercial stamp duty as well as the expected announcement on the National Minimum Wage.
“Whilst we welcome the announcement of changes to KEEP, EII and the increase in the R&D tax credit to 30% for micro and small firms, it is regrettable that the government has again ignored the SFA’s call to reduce Capital Gains Tax to 20% across the board, to make investing in a business in Ireland more attractive.
“The Earned Income Tax Credit (EITC) for the self-employed has come closer to parity with the PAYE Tax Credit with today’s announcement of an increase of €150 to €1500. the SFA will continue to campaign for the gap between EITC and the PAYE Tax Credit (€1650) to close fully in next year’s Budget.”
Gearóid O’Driscoll, CPA Ireland
“The increase in Carbon Tax, which is intended to deliver much needed reduction in Ireland’s carbon footprint, could have a disproportionate impact on regional SMEs. CPA Ireland welcome the increasing of the R&D tax credit and its new focussed support for the small and micro sector. The inclusion of pre-trading expenditure is a positive move and we hope this will be combined with an administrative system designed with the budgetary restrictions of small and micro companies in mind.”
Paul Murphy, Rise TD
“Budget 2020 is a tale of two budgets. If you are wealthy, if you’re a developer, or a major corporation this budget will benefit you. If you are a low or middle income worker, part of a rural family, or are affected by the housing crisis, this budget will leave you worse off. The budget further exacerbates the inequality in society – placing the burden of Brexit and climate change on working class people, while continuing handouts and give-aways to the rich and wealthy.
“The carbon tax is an eco-austerity measure masquerading as environmental policy. It puts the burden on the shoulders of ordinary people, while letting the big polluting corporations who are most responsible for carbon emissions off the hook again. The government is right to fear a backlash against it. People were hammered to pay for the financial crisis of the banking system, they won’t carry the burden again so that major corporations can continue to pollute and profit.”
Brian Cooke, SIMI
“The replacement of the 1% diesel surcharge introduced last year on new cars with a nitrogen oxide (NOx) emissions-based charge to all passenger cars registering for the first time in the State from 1 January 2020 is a welcome announcement. The NOx charge will impact on older higher emitting cars which, unlike last year’s diesel surcharge, will penalise older cars with higher levels of pollutants. In addition, the extension of the BIK relief for Electric Vehicles out to 2022 will incentivise the choice of electric cars for companies for the duration of the normal three-year replacement cycle.”
Niall Comer, Conradh na Gaeilge
“Fairness for the Irish language and the Gaeltacht is not be seen in the budget 2020 announced by the Government today, especially when it’s taken in to account that the extra allocation of €5 million announced for the Arts Council alone in 2020 is double the allocation of €2.4 million announced for the Irish language, the Gaeltacht, the Islands and Foras na Gaeilge all put together. We have no problem with additional funding for the arts, and we welcome this increase, but there should also be fairness for the Irish language and for the Gaeltacht.”
Mark O’Rourke, Bibby Financial Services Ireland
“The UK has long provided Irish SMEs with an obvious path to growth, but this will be made more difficult by Brexit, whatever form it ultimately takes. As a result, Irish SMEs are increasingly looking to diversify as much as possible and export to new markets wherever possible. I
“In the last year we’ve seen considerable increases in the amount of Irish goods flowing to Germany, the Netherlands, or Italy, for instance. In support of this, the minister’s pledge to allocate a range of funding measures to businesses reorientating towards new markets is therefore to be welcomed, but the devil will be in the detail in terms of how this is allocated across sectors and around the country.”
Rachel McGovern, Brokers Ireland
“Though small the €15,000 increase bringing the tax free threshold for inheritance tax to €335,000 is an important improvement, particularly in an environment where parents are increasingly under pressure attempting to support adult children who are having much greater difficulty than their parents had in reaching the milestone of acquiring a first home.”
James Benson, Irish Homebuilders Association
“Our analysis shows that average couple, even with the Help to Buy, will struggle to save the required deposit. Couples earning under €93,000 are effectively frozen out of the Dublin housing market; even with the HTB they will have to save €20,000 as a deposit. At current rent levels, this savings level is beyond most couples These couples are consigned to rental purgatory for the foreseeable future.
“The Help to Buy, whilst helpful, on its own doesn’t address affordability issues or rising construction costs. We must address the cost of home building where soft costs i.e. taxation, levies, finance and fees equate to c.30% of the price of new homes. An increase in stamp duty announced today will mean a further land transaction fee adding to overall costs and potentially affecting viability of marginal projects.”
Marian Finnegan, Sherry FitzGerald Group
“The government’s endorsement of the success of the Help to Buy is positive news. However an extension for a longer period such as five years would have provided much more certainty for suppliers of new homes. Furthermore, despite the significant challenges in the rental market the government have once again failed to address the continued outflow of private investors from the buy to let market. The initiatives announced today will provide some certainty for first time buyers but unfortunately not for those renting.”
Dr Seán Healy, Social Justice Ireland
“Budget 2020 failed in its basic task to protect the vulnerable. While TDs will see their salaries rise by about €1,600 in the coming year, many of Ireland’s most vulnerable people will see their welfare payments remain unchanged. Among other things they will face additional increases in the cost of food as a result of Brexit, and they also face higher charges for public transport as a result of increased carbon tax.
“The cost of living for average Irish households will rise by between €892 and €1,360 a year as a result of Brexit with those on lower incomes being most exposed. If a hard Brexit emerges there is an unavoidable need for a Supplementary Budget to ensure the vulnerable are protected from its inevitable impact.”
Brian Keegan, Chartered Accountants Ireland
“Alternatives to traditional bank lending as funding for business have become increasingly important since the downturn. Tax relief for risk investment in Irish indigenous business has existed for several years, but has not been as effective as it should have been, because of the very high burden of risk placed on the company receiving the funds.
“The improvements announced today to the Employment and Investment Incentive and the Key Employee Engagement Programme have to be sufficiently effective to result in improved take-up, and not just window dressing for already less than successful schemes.”
Michael Lennon, Irish Hotels Federation
“Budget 2020 is heralded as a Budget for Brexit. Despite the serious challenges facing tourism, government has failed to recognise the importance of competitiveness and its role in the ever increase in the cost of doing business in Ireland. This is a missed opportunity to rebalance the tax take from tourism at a time when economic indicators provide significant warning of a change in outlook.”
Pat Davitt, Institute of Professional Auctioneers & Valuers
“The existing drift of the private landlord from the market is set to continue and is likely to escalate. Many private landlords pay tax rates of 55% on rental income and are also subject to Stamp Duty and Capital Gains Tax on sales. Yet commercial landlords in the build-to-rent sector pay little or no tax.
“Private landlords should be treated like other commercial and farming landlords who get write-offs against tax for long term leases. This has proved very successful in the farm renting business and encourages farmers to rent longer term. It would help stem the flow of private landlords from the market.”