Managing the cost of tax reliefs must be matched by managing public expenditure

Oct 08, 2019

It was essential to frame a Budget for 2020 in the context of the serious damage which Brexit could do to the Irish economy, according to Chartered Accountants Ireland.

The greatest threat from Brexit is to employment, according to all-island organisation Chartered Accountants Ireland. The disruption of our trading arrangements with our single largest trading partner in goods is going to have knock-on effects, both for deal and no-deal Brexit scenarios according to Director of Public Policy Dr Brian Keegan.  In that context, though it is unpalatable, it is correct to limit the extent of tax relief measures in today's Budget. 

However, experience suggests that control over government expenditure has not been as tight as control over taxation, with supplementary estimates for health, justice and education required this year.  The freeze to tax allowances and credits in 2020 will only be credible if expenditure stays within agreed Budget limits as well. 

Supports for business sectors post-Brexit

Chartered Accountants Ireland (the Institute) supports the establishment of a substantial fund to provide resources for industry sectors affected by the change in the trading environment.  However, the existing €600 million Brexit loan fund has not been fully availed of, because businesses are unwilling to incur debt in an uncertain environment.  The future emphasis must be on grant aid and direct supports to secure employment.

Carbon taxes

In the medium term, carbon taxes can only be effective if alternatives are made available to businesses and consumers to reduce carbon emissions when meeting transport, heating and power requirements.  While the carbon tax increases are relatively modest in the context of the Government's target of a fourfold increase in carbon tax, they nevertheless will have a real impact on businesses and consumers.  There must be clear evidence at an early stage that the additional taxes collected are being applied towards the “Just Transition” promised by the Taoiseach at the UN Climate Change summit last month, and to support the provision of viable alternatives for consumers in the public transport sector in particular.

 

Increase in the earned income tax credit

The earned income tax credit reduces an inequity in the tax system which resulted in people in employment having lower tax bills than people with similar earnings who are self-employed.  The Institute notes that during the recession of 2008, the self-employed sector was particularly hard-hit.  It is therefore appropriate to move in the right direction by increasing the earned income tax credit which the self-employed primarily benefit from, by a relatively modest €150.

Business tax supports and incentives

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 Scheme (EIIS) and the Key Employee Engagement Programme (KEEP) have to be sufficiently effective to result in improved take-up, and not just window dressing for already less than successful schemes.

Housing

The lack of availability of residential accommodation remains a blight on our society, and a handicap to business growth because of high accommodation costs for workers.  The Institute believes that more could have been done in this Budget to improve the supply of residential accommodation, particularly rented residential accommodation in the private sector.  Acknowledging the extension of the help-to-buy scheme, further tax rule changes are required to help ensure landlords remain in the residential lettings market.

ENDS

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About Chartered Accountants Ireland
Chartered Accountants Ireland is Ireland’s largest and longest established professional body of accountants founded in 1888. The Institute, which is an all-island body, currently represents over 27,000 members around the world. 

Reference
Claire Percy | Chartered Accountants Ireland | 086 216 4393 | Claire.percy@charteredaccountants.ie