Tax Director, Patrick Fannon, shared his analysis of Budget 2022 at our Webinar earlier this morning.
According to Mr. Fannon “The backdrop the Budget 2022 announcements yesterday was in many ways so far removed from that which shaped the same process for 2021. The economy is now emerging with a significant rebound after dealing with the main impact of a global pandemic and the consequences of Brexit, exhibiting a higher than expected buoyancy in overall taxation receipts. The importance of maintaining this economic recovery, alongside the pressures being exerted on the cost of living and keeping pace by ensuring targeted measures for businesses, the housing sector and the climate agenda, set the framework for what was outlined in the Minister’s speech."
There were limited tax measures of €500m compared to an overall budget package of c.€4.7bn. The majority of these measures were allocated to provide for indexation of the standard rate band and the headline tax credits being increased by €50, together with some modest changes to USC. Whilst remote working has been forefront in terms of our approach to work over the past year, there were no significant movement in terms of targeted measures here, other than to align the tax deduction which is available to e-Working employees for expenses such as electricity and heat (30% of the vouched cost) to that which was already in existence for broadband expenses.
The most welcomed announcements come in the form of measures to support businesses, including a commitment to the ongoing availability of the Employment Wage Subsidy Scheme (‘EWSS’) to 30 April 2022, improvements to the Employment Investment Incentive (‘EII’) to increase attractiveness for investors, and the extension of the Start-Up Relief for new companies. There was also the assurance as part of our Agreement to align to the Accord on Global Tax Reform of the retention of the 12.5% rate of Corporation Tax for those businesses with global revenues less than €750 million.
The provision of housing and addressing the market imbalance in terms of supply/demand and rising prices is a core challenge for the Government. The headline item in this regard in the introduction of a new Zoned Land Tax within the next 2 years, the objective being to encourage supply into the residential property market. The Help to Buy Scheme has been extended for a further year to offer welcome relief for first time buyers, with a commitment to a review of the ongoing viability of the scheme to take place in 2022.
The response in terms of climate measures has garnered criticism in some quarters in terms of a lack of vision for more innovative and radical measures which are required to meet our emissions targets. It is clear the focus of Government in terms of the staged increases in Carbon Tax to 2030 will form the core measure in achieving this objective, with only some modest measures announced in terms of the Accelerated Capital Allowances (‘ACA’) scheme, VRT changes and extension of the Benefit-in-Kind (‘BIK’) exemption for electric vehicles (albeit subject to tapering of the relief in the coming years).
For another successive Budget, there have been no material changes to the rates of Capital Taxes and related reliefs. An improvement to the CGT Entrepreneur Relief in terms of additional threshold and a broadening of certain conditions would have complemented the announcement in terms of improvement to the EII Scheme, given our relatively high headline rate of CGT of 33%. There was also nothing significant in the way of R&D and Innovation, outside of the new Digital Gaming Tax Credit. Improvements in the R&D regime and further clarity on a path to enactment of the 30% rate of credit of Small and Micro Companies would have been welcomed.
On the whole, the Budget announcement could be summarised as generally prudent and much the case of offering something across all key areas, in what the Minister has dubbed as the first step on the path to the new phase of recovery form the pandemic, restoration of public services and the management of the public finances. The independent Commission of Taxation and Welfare has been established to consider how best the taxation and welfare systems can support these overarching objectives, with recommendations envisaged for the summer of 2022 following a consultation process. The outcome from the previous Commission saw the enactment of various measures, so we can expect to see proposals feeding through in good time ahead of the Budget process next year.
RBK will also be considering the details of the Finance Bill 2021 once published in the coming weeks, with further analysis and commentary to follow.