The Minister for Finance has today chosen not to increase the overall burden of taxation on the economy, and Chartered Accountants Ireland believes this is the right course of action if we are to restore economic growth.
Income Tax
"It would have been wrong to increase the income tax burden on both public and private sector employees given the collapse in private sector income levels and the severe cuts in the public sector pay bill. Furthermore, stable rates of income tax and PRSI make a real difference towards preserving and growing employment levels" according to the Chartered Accountants Ireland President Tom Fitzpatrick. "They also help ensure that wage costs, often the largest component of the overall cost of goods and services, do not grow out of control".
VAT and Excise Reductions
The modest reduction in the top rate of Value Added Tax, combined with the reduction in Excise Duties on alcohol may tackle the issue of cross border shopping, but should also offer some stimulus to the hospitality sector in particular.
Business Incentives
At a time when the Minister has little scope for introducing tax incentives, he seems to have prioritised Research and Development and International Financial Services activities. This sends out a strong positive message about Ireland's willingness and capacity to trade and deliver services internationally.
Finance Bill 2010
A feature of the Minister's speech was the promise of significant measures to be introduced in Finance Bill 2010. We will not know until the publication of that Bill the full extent of many of today's announcements.
Cuts
While no-one would willingly advocate the cuts to Social Welfare Benefits and Public Sector Pay which the Minister has outlined, they will serve to help us manage the corrosive cost of servicing our national debt. Every euro paid in interest in servicing the national debt is a euro forgone in improving Social Welfare, our Health and Education systems and our national infrastructure.
Future Developments
The Minister has outlined a programme for the future shape of our tax system, including a radical restructuring of our Income Tax and PRSI codes. However, for now, the most important aspect of this Budget is that it is fit for purpose for the whole of 2010. There are still many hurdles to economic recovery, not least the prospect of increasing interest rates towards the back end of next year. The decisions not to increase the mainstream rates of income tax and capital taxes should mean that we can better deal with the challenges of the next few months.
Corporation Tax
Chartered Accountants Ireland unequivocally welcomes the Minister's continued commitment to preserving the 12.5% rate of Corporation Tax. This is essential to Ireland's competitive position internationally as a good location for foreign investment. Foreign Direct Investment is a critically important dimension of our economy.