Michael Noonan, Minister for Finance delivered his sixth Budget speech on Tuesday 11th October 2016 while Minister for Public Expenditure & Reform, Paschal Donoghoe later outlined the measures in public spending – between them a € 1.3billion package of tax cuts and public spending of which € 500m were tax cuts.
Mr Noonan said Ireland “is in good shape” but called for “prudence despite the improving economic situation and said the lessons of the bad years for Ireland should not be forgotten.” Mr Donoghoe stated that the Government will in 2017 have €53.5 billion for gross public expenditure, which he says is almost €11,500 for every citizen.
While Budget ’17 had something for everyone, the overall effect is not going to make any real difference to the quality of life for most people. Branded a “timid Budget” by the Automobile Association and the “Fiver Budget” by others – everyone got a € 5 – one could invoke the bard and one of his famous plays and say that Budget ’17 was Much Ado About Nothing. First time buyers will still feel aggrieved in their efforts to save and buy a home. They will still require 20% deposit.
Employment was also addressed – € 458m allocated for 2,400 teacher recruitment of which 900 will be Resource teachers. A total of 4,500 new “frontline” staff including 800 gardai and 500 for administration plus the 2,400 teachers and 800 others. The € 458m figure is part of a total Education budget of € 9.5billion which represents 16% of the total annual budget. Nearly 25% of the total budget is spent on Health ( € 14.6billion ) The minimum wage increase of 10cents to € 9.25 per hour is of little help to those who really need it.
Highlights at a glance….
- Universal Social Charge – The three rates ( 1%, 3% & 5%) were reduced by 0.5% each.
- Deposit Interest Retention tax ( currently 41% ) – Reduced by 2% for each of the next 4 years to 33% in 2020
- Capital Acquisition Taxes (CAT)
– Increased by € 30,000 in Band A to € 310,000 ( parent to child )
– Categories B & C increased by 8%
- State pension & all social welfare payments
– Increased from March 2017 by € 5 per week
- Christmas bonus
– 85% of the bonus will be paid December 2016 to those qualified
Help to Buy scheme announced for first-time buyers relating to newly-built homes over a 4 year period starting from 15th July 2016 until 2019.
Rent A Room Allowance increased by € 2,000 to € 14,000
INCOME & OTHER TAXES
- Universal Social Charge (USC)
The three rates ( 1%, 3% & 5%) were reduced to 0.5%, 2.5% and 5%
– 2.5% USC rate ceiling increased from €18,668 to €18,772
– No USC is payable if you earn less than € 13,000
The lower 1% USC rate which applies on the first €12,012 of income has been cut by 0.5%. This is worth €60 a year to anyone who pays USC. The next 3% rate which applies on the next €6,660 of income up to €18,772 has also been cut by 0.5% to 2.5%. This will deliver another €34 a year to anyone earning €18,722 or more per annum. Adding the gains from the cut in the lower rate brings their total gains from these two cuts to just under €100 a year for anyone earning €18,772 a year or more.
The main USC rate of 5.5% has also been cut by 0.5% to 5%. This rate applies on incomes between €18,772 and just over €70,000. This deliver more substantial gains to middle and higher earners. The maximum gain, coming to someone earning just over €70,000 from this cut is a little over €256 a year. Add the €100 gain from the cut in the two lower USC rates and the total again for someone earning €70,000 from the USC cuts is just over €355 a year.
- Corporation Tax
Remains unchanged at 12.5%
- Capital Gains Tax
– Selling a business sees the CGT tax rate cut from 20% to 10% wito a limit of €1million in chargeable gains
- Capital Acquisition Tax
– Increased by € 30,000 in Band A to € 310,000 ( parent to child )
– Categories B ( brother/sister, aunt/uncle, nephew/niece ) & C (all others ) increased by 8% to € 32,500 and € 16,250 respectively
- VAT rates
– Remain the same especially the 9% VAT (rather than 13.5%) on tourism and hospitality.
SMALL & MEDIUM SIZED BUSINESSES
- Start Your Own Business scheme to be extended for a further two years
- €1,270 income tax credit for fishermen if you spend 80 of the 365 days at sea.
- for self-employed increased by €400 to €950. This will benefit over 147,000 people.
SOCIAL WELFARE BENEFITS
- All social welfare payments increased by € 5 per week ( mainly to € 193 pw ) This includes jobseekers’ benefits, the one-parent family payment and carers’, jobseekers’ and disability allowances. This comes at a cost of €301 million.
- Jobseekers between 18-24 to see increase in their Allowance of €2.70 from €100 per week to €102.70
- Home Carer Tax Credit €100 increase to €1,100 per annum
- Medical card for all children who receive domiciliary care allowance
- New Single Affordable Childcare Scheme from September 2017 – means-tested subsidies, based on parental income, for children between 6 months and 15 years and universal subsidies for all children aged 6 months to 3 years. The subsidies will be paid for children and young people going to a Tusla-registered childcare provider.
- The Early Childhood Care and Education Scheme and the pre-school scheme will be extended with a further €86 million provided for the full year costs.
HOUSING, THE HOMELESS AND OTHER SOCIAL HOUSING BENEFITS
- Mortgage interest relief due to end 2017 is extended to 2020
- Home Renovation Scheme extended for two years to end of 2018
- Homeless budget increased by € 28m to just under € 100m
- €1.2bn in funding for housing, with 47,000 new social housing units by 2021
- Capital allocation of €50 million for a local housing activation fund. The government wants this money (the fund is worth €200 million total) to provide 20,000 private homes by 2019.
- Housing Assistance Payment Scheme – additional €105m to enable 15,000 more households to avail of the scheme
- Landlords will also see an increase in their mortgage interest relief deductibility (from 75% to 80%).
INDIRECT TAXES, EXCISE AND OTHER DUTIES
- Tobacco – up 50 cents per pack of 20 – now costing € 11.00 per pack, with 25g packet of rolling tobacco increasing by 50 cent effective from midnight 11th October 2016
- No change on petrol/diesel or alcohol
- The minimum wage per hour rises 10cents from € 9.15 to € 9.25.
- The € 5,000 relief from VRT tax on electric vehicles to be extended for another five years.
For farmers, farming and the agri-food sector
- Low cost, highly flexible loan fund .
- A new income averaging ‘step out’ for farmers will commence immediately. This means farmers pay tax on an average of five years’ income to balance it out. If they have a bad year, they will be able to opt to pay tax on that year alone now to lower their tax bill.