9 July 2023 – The success of future generations must be prioritised over short-term measures in Budget 2024, to ensure economic and societal progress in the decades to come. This is according to the Consultative Committee of Accountancy Bodies-Ireland (CCAB-I), the umbrella group which represents over 50,000 professional accountants, as it published its Pre-Budget Submission today.
The submission, entitled ‘Supporting Ireland’s Transition to a Sustainable future’, prioritises the long-term, highlighting that while the Irish economy has doubled in size in the past decade, we still have significant shortfalls in healthcare, housing, transport infrastructure and education. Demographics are exacerbating these shortfalls.
The submission identifies two key areas for budgetary focus;
The introduction of an intermediate 30% rate of income tax to reduce the tax burden on younger workers; and
Investment in housing capacity to accommodate our young workforce and our significant FDI community.
Commenting, Tax and Public Policy Lead at Chartered Accountants Ireland, Cróna Clohisey said:
“In the absence of a long-term focus, we risk an intergenerational divide becoming a chasm. The half-year Exchequer returns of €41bn published this week highlight more than ever the difficult decisions government faces in Budget 2024. This sum represents an 11% increase on the same period last year, but it is now, when the Exchequer is relatively robust, that government should limit itself to modest budgetary tax adjustments and put real spending power behind sustained investment in infrastructure, particularly housing.
“Our economic position is strong, but it is not future-proofed. There is a real divide between generations in terms of access to housing, pensions security and many other indicators. We need Ireland to be a country our young people choose to stay in and that others choose to bring their skills to, but we cannot do that without long term, strategic interventions in transport, health, and housing.”
Reforming the income tax system
Ireland’s 40% tax rate is high in comparison to other competitor countries and the CCAB-I believes that introducing a third rate of income tax of 30% would make the system more equitable. It would also enhance Ireland’s attractiveness as a place to work, particularly among younger workers.
Ms Clohisey continues:
“Workers in Ireland pay income tax at a rate of 40% once they earn €40,000. This entry point is below the average wage and is significantly lower than most countries across the UK and Europe where incidentally having more than two tax rates is extremely common.”
“Speaking on behalf of a mobile profession where most are in the early stages of their careers and are planning their futures, introducing an intermediate 30% rate would make the system more attractive and more equitable, lessening the tax burden on workers and putting more money in their pockets. An intermediate rate would also support Ireland’s FDI offering. The government needs to take immediate action to address the inequities that clearly exist within the system.”
The submission also proposes:
Income tax credits and rate bands should be index-linked to earnings to account for inflation
Employers’ PRSI should not be increased
The rate of CGT and CAT should be reduced from 33% to 20%
The CGT annual exempt amount should be increased from €1,270 to €5,000
The Category A threshold for CAT should be increased from €335,000 to €350,000
The CAT small gift exemption should be increased from €3,000 to €5,000.
Housing measures
The CCAB-I believes that small private landlords are critical in boosting Ireland’s housing supply, particularly in provincial towns where demand is not sufficient to justify large-scale investment in the private rental sector.
Ms Clohisey continues:
“Our members tell us that one of the biggest barriers to expansion is the lack of adequate, affordable housing that is reasonably located for their staff. We do our young people an enormous disservice by limiting their opportunities to live and work where they want to.”
“The tax burden of small private landlords should be the same as that for companies at the 25% rate, rather than at the marginal rate of 52%. On the supply side, to enable property developers to manage their cash-flow, a tax debt warehousing system, like that created during the pandemic, could be developed whereby the collection of taxes such as PAYE is delayed until all housing units have been sold.”
The submission also proposes:
Local property tax should be allowed as a deduction against rental income
Wear and tear rates for fixture and fittings should be increased from 12.5% to 25% per annum to facilitate landlords investing in the maintenance of properties
Where landlords retrofit a property to improve its energy rating, 100% capital allowances should be offered in the year of work
‘Rent-A-Room’ relief should be increased to match the standardised average rent and the ‘cliff-edge’ for qualifying for relief should be removed.
The Rent Tax Credit should be permanently included in legislation.
ENDS
Issued by Chartered Accountants Ireland on behalf of the Consultative Committee of Accountancy Bodies-Ireland (CCAB-I). Read the submission in full here.
About the Consultative Committee of Accountancy Bodies-Ireland (CCAB-I)
The Consultative Committee of Accountancy Bodies-Ireland is the representative committee for the main accountancy bodies in Ireland. It comprises Chartered Accountants Ireland, the Association of Chartered Certified Accountants, the Institute of Certified Public Accountants in Ireland, and the Chartered Institute of Management Accountants which combine to represent over 50,000 professional regulated accountants in Ireland.
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