The following document provides a brief outline of retirement benefit measures contained in the Finance Bill that were not announced as part of Budget 2022.

  There is increasing evidence that strong ESG (environmental, social and governance) credentials can boost a company’s bottom line while also generating access to capital. Investors, clients and employees alike are seeking out companies with credible ESG profiles. There are many reasons why it makes sense for CFOs to take on the task of aligning financial and ESG goals. CFOs work in a variety of organisations. What unites them is that they are all trusted advisors and are core to both daily operations and long-term strategies. They recognise risks and opportunities and act on them. They are involved in critical decision-making and provide reliable information to investors and boards. They advise and influence action in others and are uniquely placed to be a positive force in driving change. What distinguishes CFOs from other financial advisors is their potential to influence and encourage greener choices at an executive level within their organisation. They have the authority to advise on procurement policies and procedures that focus on sustainability as much as cost control. CFOs also have a key role in the preparation of annual reports and in deciding on what they include. Measuring sustainability-related activities and reporting on them is an integral part of becoming a sustainable business. Choosing from among the many frameworks and standards is an example of the leadership a CFO can offer, particularly in the absence of standardised and comparable frameworks. Business models are moving away from placing shareholder value at the centre. Instead, broader sustainable measures are being embraced, and the CFO will play a critical role in this process. Susan Rossney is Public Policy Officer at Chartered Accountants Ireland.

  In this week’s bulletin, read about how Budget 2022 aims to support the transition to a climate-neutral and circular economy and society with an allocation of €858 million to the Department of the Environment, Climate and Communications. Also covered are the measures announced in Budget 2022 to ‘green the tax system’. €858 million allocated to the Department of the Environment, Climate and Communications This year’s Budget 2022 allocated €858 million – an increase of 19% over 2021 – to the Department of the Environment, Climate and Communications. This allocation is broken down as follows: €368 million for Energy Transformation: €202 million from carbon tax revenue for residential and community retrofit schemes (over 22,000 home energy upgrades in total), with more than half for free upgrades for low-income households at risk of energy poverty €10m for the Solar PV scheme €31 million for energy efficiency and renewable energy schemes in businesses and the public sector. A new low-cost loan scheme for residential retrofitting will also be introduced. This part-Exchequer and part-EU funded scheme will enable credit institutions to offer loans at reduced interest rates – making energy upgrades more affordable increased resources in the department and its agencies will support the delivery of a second Renewable Electricity Support Scheme (RESS 2) auction, the first Offshore Renewable Electricity Scheme (ORESS), and to ensure continued security of electricity supply.   €251 million to support connectivity and communications, including: €225 million to further progress the roll-out of the National Broadband Plan (NBP). An estimated 60,000 premises will be passed by the end of 2021, which is less than targeted. The government hopes that investment in 2022 will allow the number to grow to at least 130,000 by the end of 2022. €2.5 million for the National Cyber Security Centre.   €152 million to support Just Transition, fund vital research and build capacity across the department and its agencies to lead and support Ireland’s response to the climate crisis: €34 million of funding will be available in 2022 for projects that are approved for EU and national Just Transition funds, in areas and sectors of the economy most impacted by the transition to net zero emissions €22 million will go towards the Bord na Móna Peatlands Rehabilitation Scheme in 2022 €11 million will fund climate research to enable Ireland to meet its renewable energy targets and climate commitments, with funding ring-fenced to strengthen and enforce air quality regulations. In tandem with this, the department will develop Ireland’s first ever Clean Air Strategy.   €98 million to support the transition to a Circular Economy and will protect natural resources, including waste management and geoscience research initiatives, supporting the implementation of the government’s Waste Action Plan for a Circular Economy, and conservation and protection of our inland fisheries (€3 million). Commenting, Minister for the Environment, Climate and Communications, Eamon Ryan TD, said: “Budget 2022 is about supporting our citizens as we begin the transition to a climate neutral, circular and connected economy and society…Cutting our emissions in half by 2030 is both a challenge and an opportunity. Today we are strengthening our capacity to do that in very practical ways." More information about the allocation can be found on the Department’s website here. ‘Greening the Tax System’ In a drive to further decarbonise the economy and meet Ireland’s commitment to reduce carbon emissions by 7 percent next year, the rate of carbon tax on auto fuels will increase again this year by €7.50 from €33.50 to €41 per tonne of CO2 from 13 October 2021.  Budget 2022 also amends both Vehicle Registration Tax rates and the accelerated capital allowance schemes to further encourage the transition to lower-emission fuels. The BIK exemption on electric vehicles is extended to 2025. Carbon tax will rise by the same amount in every Budget until 2029, further increasing the cost of petrol, diesel and home heating fuels. A 60-litre tank of diesel will increase by an estimated €1.48 from 13 October and a similar tank of petrol will cost an estimated extra €1.28. Home heating The price of home heating oil, coal and peat will all increase from 1 May 2022. A 900-litre tank of home heating oil will cost €19.40 more a 40kg bag of coal will cost 89 cents extra and a 12.5kg bale of peat briquettes will go up by 20 cents. The cost of annual natural gas usage will increase by an average of €16.95. Funds raised from these increases are intended to go towards funding an increase in the fuel allowance in addition to programmes aimed at reducing the State’s overall carbon footprint, including the better insulation of homes. Electrical vehicles – BIK exemption extended The BIK exemption where an employer makes a battery electric car (both new and used) available to employees has been extended until 2025. This exemption was due to end on 31 December 2022. There will however be a tapering effect on the vehicle value. For BIK purposes, the original market value of an electric vehicle will be reduced as follows: by €35,000 for 2023 €20,000 for 2024 and €10,000 for 2025. Accelerated capital allowances scheme Amendment for energy efficient equipment The accelerated capital allowance scheme for energy efficient equipment, which allows the full cost of expenditure on qualifying energy efficient equipment to be deducted for tax purposes in the year of purchase, has been amended to disallow equipment that is directly operated by fossil fuels from qualifying. Gas vehicles and refuelling equipment Introduced in the Finance Act 2018, this scheme allows the full cost of expenditure on qualifying gas vehicles and refuelling equipment used for business purposes to be deducted from taxable profits in the year of purchase. The scheme, which is particularly focused on the heavy-duty land transport sector, was due to end on 31 December 2021 but has been extended until 31 December 2024. Furthermore, in an effort to encourage the transition to lower-emission fuels, the scheme will be extended to include hydrogen powered vehicles and refuelling equipment. Income from micro-generation of electricity A tax disregard of €200 is being introduced for personal income received by households who sell residual electricity generated by them back to the grid. Vehicle Registration Tax (“VRT”) In order to reinforce the environmental rationale behind the VRT system, a revised vehicle registration tax table is being introduced from 1 January 2022.  This will result in increases in the rates of VRT. The 20-band table will remain; however, there will be: a 1 percent increase for vehicles that fall between bands 9-12 a 2 percent increase for bands 13-15, and then a 4 percent increase for bands 16-20. The €5,000 relief from VRT for battery electric vehicles is being extended to 31 December 2023. You can find all of Chartered Accountants Ireland’s Budget 2022 coverage here. You can find information, guidance and supports to help members understand sustainability and meet the challenges it presents in our Sustainability Centre. Read all our updates on ourPublic Policy web centre  

In a drive to further decarbonise the economy and meet Ireland’s commitment to reduce carbon emissions by 7 percent next year, the rate of carbon tax on auto fuels will increase again this year by €7.50 from €33.50 to €41 per tonne of CO2 from midnight.  Budget 2022 also amends both Vehicle Registration Tax rates and the accelerated capital allowance schemes to further encourage the transition to lower-emission fuels. The BIK exemption on electric vehicles is extended to 2025. Carbon tax will rise by the same amount in every Budget until 2029, further increasing the cost of petrol, diesel and home heating fuels. A 60-litre tank of diesel will increase by an estimated €1.48 from 13 October and a similar tank of petrol will cost an estimated extra €1.28. Carbon tax will rise by the same amount in every Budget until 2029, further increasing the cost of petrol, diesel and home heating fuels. Home heating The price of home heating oil, coal and peat will all increase from 1 May 2022. A 900-litre tank of home heating oil will cost €19.40 more while a 40kg bag of coal will cost 89 cents extra and a 12.5kg bale of peat briquettes will go up by 20 cents. The cost of annual natural gas usage will increase by an average of €16.95.   Funds raised from these increases are intended to go towards funding an increase in the fuel allowance in addition to programmes aimed at reducing the State’s overall carbon footprint, including the better insulation of homes. Electrical vehicles – BIK exemption extended The BIK exemption where an employer makes a battery electric car (both new and used) available to employees has been extended until 2025. This exemption was due to end on 31 December 2022. There will however be a tapering effect on the vehicle value. For BIK purposes, the original market value of an electric vehicle will be reduced by €35,000 for 2023; €20,000 for 2024; and €10,000 for 2025. Accelerated capital allowances scheme Amendment for energy efficient equipment The accelerated capital allowance scheme for energy efficient equipment, which allows the full cost of expenditure on qualifying energy efficient equipment to be deducted for tax purposes in the year of purchase, has been amended to disallow equipment that is directly operated by fossil fuels from qualifying. Gas vehicles and refuelling equipment Introduced in the Finance Act 2018, this scheme allows the full cost of expenditure on qualifying gas vehicles and refuelling equipment used for business purposes to be deducted from taxable profits in the year of purchase. The scheme, which is particularly focused on the heavy-duty land transport sector, was due to end on 31 December 2021 but has been extended until 31 December 2024. Furthermore, in an effort to encourage the transition to lower-emission fuels, the scheme will be extended to include hydrogen powered vehicles and refuelling equipment. Income from micro-generation of electricity   A tax disregard of €200 is being introduced for personal income received by households who sell residual electricity generated by them back to the grid. Vehicle Registration Tax (“VRT”) In order to reinforce the environmental rationale behind the VRT system, a revised vehicle registration tax table is being introduced from 1 January 2022.  This will result in increases in the rates of VRT. The 20-band table will remain; however, there will be a 1 percent increase for vehicles that fall between bands 9-12; a 2 percent increase for bands 13-15; and then a 4 percent increase for bands 16-20. The €5,000 relief from VRT for battery electric vehicles is being extended to 31 December 2023.

Confirmation that the Employment Wage Subsidy Scheme (EWSS) will remain in place in a graduated form until 30 April 2022 will give vital certainty to over 39,000 employers who are still registered for the support, Chartered Accountants Ireland said today. Reacting to Budget 2022, the largest professional accountancy body on the island of Ireland said this support is key to helping the SME sector to return to pre-pandemic trading levels.  Business supports Norah Collender, Professional Tax Leader, Chartered Accountants Ireland said “Today’s decision to extend the EWSS until 30 April 2022, avoiding any cliff edge, will come as a major relief for many small businesses that are still not operating at full capacity, for example in the tourism, hospitality, and entertainment sectors. These supports cannot last forever, but their presence over the last 18 months has been an example of a targeted, partnership-based approach by the state which has kept many businesses afloat.”   In contrast, the Institute referenced the decision to not reduce Ireland’s rate of Capital Gains Tax, among the highest in the EU, from 33 per cent as a missed opportunity, noting the role that a reduced CGT rate could have played in supporting entrepreneurship and encouraging investment in SMEs that need capital. The Institute also noted the announcement by Government that new companies can continue to benefit from a reduction in corporation tax, with companies now able to avail of this for the first five years of trade, an increase on the previous limit of three years. Collender said “The struggle for survival is a reality for start-up companies, and that struggle is even more acute for businesses starting out just as the country recovers from a pandemic and ongoing Brexit disruption. A reduced corporation tax liability for such business will help cash flow and is a worthwhile endorsement of the Irish entrepreneurial spirit.” Carbon reduction measures Ireland’s enterprise sector accounts for just over 13% of the economy’s total emissions. According to the Institute, there was very little in today’s Budget to incentivise those businesses to help achieve the 7 per cent annual emissions reduction that the Government has committed to over the next decade. Commenting, Cróna Clohisey, Public Policy Lead, Chartered Accountants Ireland said “Businesses, particularly SMEs, will play a crucial rule in meeting the Government’s net-zero carbon emissions targets by 2050. However, businesses can only deliver if they are supported by the right policy frameworks and incentivised by Government to commit to carbon-reduction targets.  “The absence in this Budget for example of an enhanced R&D Tax Credit to fast track the development of green technologies making renewable energy cheaper and more readily available, is a real missed opportunity.” This lack of incentive and alternatives for businesses to make a different choice, also applies to consumers, with the Institute noting that the biggest challenge of tackling climate change continues to be changing human behaviour. Clohisey continued “Any positive environmental impact of carbon taxes is limited by the lack of alternatives for consumers. Higher diesel and petrol prices will not have any real impact on car usage or carbon emissions until affordable alternatives are provided to consumers. Electric cars remain expensive and while the extension of the BIK exemption on electric cars out to 2025 is broadly welcome, the grants available to purchase new electrical cars should be extended to second hand electric vehicles.  “Similarly, today’s carbon tax rise is effectively cancelled out by the resulting need to increase the weekly fuel allowance payment. Continuing to increase the fuel allowance without accelerating the retrofitting of homes for those in fuel poverty risks leaving the State in a holding pattern, without forward momentum towards net-zero.”  Supporting home working The pandemic has shone a harsh spotlight on how the taxation system reflects the costs for employees working from home. To date, tax relief can only be claimed on expenses incurred for equipment used “wholly, exclusively and necessarily” in the performance of the duties of employment, with a strict interpretation of this resulting in complex rules and slim odds of making a successful claim. Restrictive tax rules for making claims for costs of utility bills have resulted in a low uptake to date by remote workers. Norah Collender, Professional Tax Leader, Chartered Accountants Ireland said “Fairer and more accessible tax rules must be developed as part of an effective strategy for remote working. The Institute has previously called for a similar measure to the UK’s ’express claim’ tax relief to be considered by the Irish Government; while more modest, it is easier to claim. Today’s increased relief for 30 per cent of electricity, heating and broadband costs will only facilitate the hybrid working model if the tax relief is straightforward for claimants.” ENDS

The Irish Government has published the Report of the Commission on Pensions which puts forward a number of proposals to address the sustainability of the State Pension. Many of the recommendations put forward by the Institute to the Commission form part of the proposals including the need for a coherent long-term strategy on State Pension reform, delaying any increases to the State Pension Age until 2028 in order to give workers time to plan for their retirement, abolishing mandatory retirement ages and introducing automatic enrolment as soon as possible.   Overall, the Commission recommends that any of the proposals that are progressed by Government are subject to further gender, equality and poverty proofing. The Commission also emphasised the need for “enhanced transparency and recommends ongoing communication relating to State pension reform to secure public understanding of the importance of sustainability, certainty and poverty prevention.” A summary of the recommendations is provided below. State Pension Age 10 of the 11 members of the Pension Commission recommended a gradual incremental increase in the State Pension age by three months each year commencing in 2028, reaching 67 in 2031 (10 years from now), with further increases of three months every second year reaching 68 in 2039. Retirement Age Retirement ages in employment contracts should be aligned with the State Pension age, by introducing legislation that allows but does not compel an employee to stay in employment until State Pension age.  More generally, an employer would not be able to set a compulsory retirement age below the State Pension age. Flexible Access The Commission recommends that a person may choose to defer access to the State Pension up to age 70, and receive a cost neutral actuarial increase in their State Pension payment. The Commission also recommends that a person can continue to pay PRSI contributions past State Pension age at their existing PRSI contribution rate (employees, employers and the self-employed) to improve their social insurance record for State Pension Contributory purposes. The Commission also views it worthwhile in recognising long PRSI contribution histories by including a provision whereby those who choose to retire at 65, and have a long Total Contributions (TCA) record of 45 years, may receive a full pension. Financing the State Pension The Social Insurance Fund should continue to be financed on a pay as you go basis, and there should be a separate account in the SIF for State Pensions in order to provide transparency and the Fund’s ability to meet its commitments on an ongoing basis. Annual Exchequer contributions to the ‘State Pension’ account of the SIF should be made rather than relying on Exchequer subventions only when the SIF is in deficit. PRSI recommendations Maintaining the exemption from PRSI on all social welfare payments Removing the exemption from PRSI for those aged 66 years or over - the Commission recommends that all those over State Pension age should pay PRSI on a solidarity basis (Class K) on all income currently subject to PRSI Removing the exemption to pay PRSI on supplementary pension income (occupational and personal pensions, and public sector pensions). Increasing self-employed PRSI from 4 percent to 10 percent gradually and in the medium term, Class S PRSI rate should be set at the higher rate of Class A employer PRSI (currently 11.05 percent). Not increasing employers and employees PRSI until after 2030. After than the rate would increase by 1.35 percent by 2040.  Payment rate The Commission endorses the principle of benchmarking and indexation of State Pension payments and supports the establishment of an independent standing body to advise the Government on pension rates of payment Total Contributions Approach v Yearly Average The Commission recommends that the full transition to a Total Contributions Approach and the abolition of the Yearly Average approach to calculating entitlement to the State Pension Contributory rate of payment should be implemented as soon as possible, pending the passage of necessary legislation and IT system changes. Since 2019, both calculation methods have been in operation with the better rate from the two methods awarded. However, this has caused anomalies and unfairness in the system where people with fewer contributions can still qualify for further high levels of payment. Therefore, the Commission recommends that for those who are better off under the Yearly Average approach, a phased transition to the TCA approach should apply gradually over a 10-year period. Long-term carers Long-term carers are defined as carers who have been caring for more than 20 years. The Commission recommends that they should be given access to the State Pension Contributory by having retrospective contributions paid for them by the Exchequer when approaching pension age for any gaps in their contribution history from caring.   Increasing private pension coverage The Commission also endorses the early introduction of an auto enrolment pension savings system, to improve retirement income adequacy for future pensioners.