A couple of landmarks in Budget 2025, the first budget of Minister for Finance Jack Chambers and for Simon Harris as Taoiseach and the last budget of the current government. Fortunately, the Minister has inherited a sizeable surplus of €8.6bn. In the Summer Economic Statement the government indicated an €8.3bn tax and spending package, with tax measures amounting to €1.4bn and additional spending of €6.9bn. This package is circa €3bn more than in the prior year.
Whilst the Government will be keen to play down any expectation or talk of a budget giveaway, the reality of politics are that they would be foolish to ignore the fact there is an election looming with many commentators suggesting an election as early as November, which would be hot on the heels of Budget 2025, the timing of which has been brought forward by a week as compared to previous budgets.
The Minister has already given a good indication of his focus in this budget with a focus on "tax breaks for families, workers and businesses". Sounds positive and certainly what one would expect in an "election budget". The reality is that we expect that a large proportion of the tax measures will likely be taken up with increases to various tax thresholds, such as the standard rate band and the Capital Acquisition Tax (CAT) Group A threshold of €335,000, which has been in situ since 2019. To put it in context the threshold back in 2009 was €542,544. Failing to index thresholds in a time of inflation is effectively a tax increase by stealth. Increasing thresholds and committing to index link thresholds into the future would be welcomed.
The Minister will be well aware that come the election one of the core items on the doorsteps will be housing and in particular the lack of affordable housing. The coalition partners have one last opportunity in Budget 2025 to show to the electorate that they have the necessary wherewithal to tackle the problem and to present innovative ideas. Failure to do so could be costly. Make no mistake about it, the Minister has options. The Construction Industry Federation (CIF) in its pre-budget submission called for a cut in the VAT rate on new homes. There is merit in considering this measure. In addition, we have long argued for the reintroduction of tax incentives, such as for student accommodation. Will the Minister be brave enough to bring back targeted property incentives?
As regards business, it is vitally important that the Minister does not focus solely on larger multi nationals and that he does not lose sight of the importance of the SME sector in the Irish economy. Based on CSO results published on 30 January 2024, SME’s accounted for 99.8% of all enterprises and 69.2%of persons employed in the business economy in 2021. That is not insignificant. We would call on the Minister to ensure that he pays heed to the SME sector and any initiatives are not targeted solely for the benefit of the larger multinationals.
Over the next few weeks in the lead up to Budget 2025 #RBKtax will look at potential tax measures that the Government could consider and provide insights into Budget 2025.
Budget Briefing Hybrid Event
RBK will be holding its annual Breakfast Budget Briefing as a hybrid event in person at the Athlone Springs Hotel in Athlone and streaming live online on Wednesday, 2nd October. Mike Scanlan, Tax Director, RBK will be analysing the tax measures announced in Budget 2025 and David McNamara, Chief Economist with AIB will look at the economic outlook.
Registration Options:
