CTS Budget 2018 Newsletter
Minister for Finance, Mr Paschal Donohoe TD, announced his first Budget earlier today in the Dáil. For the first time in over 10 years, a Budget was delivered with the Government’s books balanced. However, despite continued strong growth rates in the Irish economy, reductions in unemployment and increases in tax revenues year on year, the Minister resisted the temptation to let go of the reins. Government debt levels and personal debt levels remain high in Ireland and therefore limit the scope for tax relieving packages. Hopefully, this means that the lessons of the past have been learnt.
There were modest personal tax relieving measures in the Budget but the Minister has outlined plans to amalgamate PRSI and USC in the years to come. Marginal tax rates in Ireland remain high (up to 55%) and there is a lot more work to be done by the Minister on the personal tax front in future years.
The Budget was announced with the continued uncertainty that Brexit has brought to the Irish economy with a small package of measures aimed at assisting SMEs affected by Brexit. It looks like the Brexit story will continue to run for some time.
The Budget was also announced with the backdrop of the continued housing crisis and increase in the number of homeless living in Ireland. The Minister has therefore introduced a number of measures aimed at stimulating property development and has adopted a carrot and stick approach. The carrot has come in the form of a reduction in the seven year holding period for the CGT relief for properties to four years, with the hope that it will incentivise land owners to release land for development. The stick is in the form of an increase in the development levy for certain vacant sites to 7% for 2020 and it remains to be seen whether this measure will result in an increase in the supply of housing.
The introduction of a 6% rate of stamp duty for commercial property is likely to have a negative impact on the commercial property market and in particular it will have a detrimental effect on property transfers within families as part of succession strategies. Consanguinity Relief has been retained for farm transfers (subject to conditions) and perhaps a form of Consanguinity Relief should again be introduced for other businesses to encourage early transfers within the family.
We invite you to review our analysis of the Budget in this newsletter and the Cahill Taxation team are available to deal with any queries that you may have on the details.