On 7 April 2009 the Irish Minister for Finance announced details of an emergency budget which included changes to the new Income Levies which were introduced in the December 2008 budget. Other areas affected include:
- Income levies – doubling of rates
- Income tax – PRSI ceiling increased
- Tax on savings – DIRT and taxes on Life Assurance Policies and Investment Policies
- Stamp duty – new levies on life assurance, insurance and a stamp duty ‘trade-in scheme’
- Capital allowances – increases in Capital Gains and Acquisitions Tax i.e. on gifts and inheritances
- Excises – increases in diesel and cigarette tax
- Social welfare – reduction of Jobseekers Allowance and Supplementary Welfare Allowance, removal of Christmas bonus payment and changes to rent supplement eligibility and payment
- Health & Children – halving of Early Childcare Supplement leading to its abolition at end of 2009
FURTHER INFORMATION
Please see information below provided by the Department of Finance
- Changes to Income Levy, Health Levy & PRSI
- Income Tax
- Taxation on Savings
- Stamp Duty
- Capital Gains Tax
- Capital Acquisitions Tax
- Capital Gains Tax, Income Tax & Corporation Tax
- Capital Allowances
- Excises
- VAT
- Social Welfare
- Foreign Affairs
- Health & Children
- Payroll Savings
- Environment, Heritage & Local Government
- Education & Science
- Agriculture, Food & Forestry
- Community, Rural & Gaeltacht Affairs
- Transport
- Defence
- Communications, Energy & Natural Resources
- Incentivised Scheme of Early Retirement in the Public Service
- Special Civil Service Incentive Career Break Scheme & Shorter Working Year Scheme
- Activation/Re-skilling and Pilot Training Scheme for Workers on Short Time
- Pension Related Deduction for Public Servants
- Pension Fund Transfer
- Capital Expenditure
- Enterprise Stabilisation Fund
CHANGES TO INCOME LEVY, HEALTH LEVY AND PRSI
- Income Levy – from 1 May - The income levy rates will be doubled to 2%, 4% and 6%. The exemption threshold will be €15,028. The 4% rate will apply to income in excess of €75,036 and the 6% rate to income in excess of €174,980.
- Health Levy – from 1 May - The health levy rates will double to 4% and 5%. The entry point to the higher rate will be €75,036.
- PRSI – from 1 May - The PRSI ceiling will be increased from €52,000 to €75,036.
- Mortgage Interest Relief - will be discontinued for any mortgage over 7 years from 1 May.
- Restriction in Interest Relief Rented Residential Property - The level at which interest re-payments can be claimed against tax for residential rental properties is being reduced from the existing 100% to 75%. This measure will apply to both new and existing mortgages. Commercial properties are not affected.
- Deposit Interest Retention Tax and Taxes on Life Assurance Policies and Investment Funds - The rates of retention tax that apply to deposit interest, together with the rates of tax that apply to (a) life assurance policies and (b) investment funds, are being increased by 2 percentage points in each case and will now be 25% and 28% respectively. The increased rates will apply to payments, including deemed payments, made from midnight on 7 April 2009.
- Life Assurance Policies - A new levy on life assurance is being introduced at the rate of 1% on premiums. This new levy will apply to premiums received by an insurer on or after 1 June 2009.
- Non-Life Insurance Policies - Change in Rate of Tax - The current non-life insurance levy of 2% is being increased by 1%. The new rate of 3% will apply to renewals and offers of insurance issued by an insurer on and from midnight on 7 April 2009 where premiums are received by the insurer on or after 1 June 2009.
- Stamp Duty “Trade-in” scheme - Establishment of a Stamp Duty “trade-in” scheme, under which no stamp duty is payable by a person who accepts a traded-in property in exchange or part exchange for a new house/apartment. Stamp Duty will apply when the person subsequently sells on the ‘swapped’/traded-in house. Full details will appear in the Finance Bill.
Rate - The capital gains tax rate is being increased from 22% to 25% in respect of disposals made from midnight on 7 April 2009.
Rate - The capital acquisitions tax rate is being increased from 22% to 25% in respect of gifts or inheritances made from midnight on 7 April 2009.
Threshold - The current thresholds of €542,544 (Group A: parents to child), €54,254 (Group B: between related persons), and €27,127 (Group C: between non-related persons) are being reduced by 20% to €434,000, €43,400 and €21,700 respectively. This reduction applies in respect of gifts or inheritances taken from midnight on 7 April 2009.
CAPITAL GAINS TAX, INCOME TAX AND CORPORATION TAX
Income and losses from dealing in residential development land
- a) The special 20% rate applied to the trading profits from dealing in or developing residential development land is being abolished. The income will be charged at the person’s relevant marginal rates of income tax or the 25% rate of corporation tax. This change will apply as regards Income Tax for the year of assessment 2009 and subsequent years and as regards Corporation Tax for accounting periods ending on or after 1 January 2009 (with accounting periods straddling that date being deemed for this purpose to be separate accounting periods).
- b) Where trading losses have been incurred from dealing in or developing residential development land in circumstances where, if trading profits had been made, they would have been eligible to be taxed at 20%, and a claim to use those losses has not been made to and received by the Revenue Commissioners before 7 April 2009, the losses from today will generally only be relievable (on a value basis) up to a maximum of 20%. Where any such loss is a terminal loss, the restriction will be implemented by “ring-fencing” the loss.
Full details of both changes will be contained in the Finance Bill.
- There will be a new tax relief on capital expenditure incurred in the acquisition of Intellectual Property. The details will be contained in the Finance Bill.
- Termination of Capital Allowances Scheme for Private Hospitals and Nursing homes. Transitional arrangements will be put in place for projects that are at an advanced stage of development. The Finance Bill will contain further details on this measure.
- Increase in Mineral Oil Tax on Auto-diesel - The mineral oil tax on auto-diesel will be increased by 5 cent per litre (including VAT) with effect from midnight on 7 April 2009.
- Tobacco Excise - The Excise Duty on a packet of 20 cigarettes will be increased by 25 cent (including VAT) with a pro-rata increase on other tobacco products, with effect from midnight on 7 April 2009.
Introduction of VAT Margin Scheme for second-hand cars - A Margin Scheme is being introduced whereby, with effect from 1 July 2009, dealers will be taxed on their margin in regard to second-hand cars they acquire and resell after that date. Second-hand cars acquired before 1 July 2009 and resold after that date will be taxed on their resale price. However, where such a second-hand car is resold before 31 December 2009 the payment of the VAT due on the resale price of the car may be spread in equal amounts over the following three VAT periods. It is not possible to write off the VAT input credit dealers have already received when they purchased the second-hand cars. The precise details will be contained in the Finance Bill.
- The personal rate of Jobseeker’s Allowance and basic Supplementary Allowance will be reduced for new claimants under 20 years of age to €100 per week from the first week of May 2009. The Qualified Adult rate payable to a Jobseeker’s Allowance/ basic Supplementary Welfare Allowance claimant aged under 20 years will also be €100 per week. These reduced personal and Qualified Adult rates of payment will not apply where a claimant is entitled to an increase for a Qualified Child.
- Removal of provision for a Christmas bonus payment in 2009.
- Savings from general control measures.
- Changes to rent supplement eligibility and payment regime.
Reduction in Overseas Development Aid.
- Early Childcare Supplement monthly payment to be halved to €41.50 per child with effect from 1 May 2009 and abolished at end-2009. It will be replaced in January 2010 with a pre-school Early Childhood and Education Scheme (ECCE) for all children between the ages of 3 years 3 months and 4 years 6 months. A capitation grant will be payable to service providers who provide free pre-school services.
A total reduction of €61m in the provision for:
- the cost of pay awards;
- new developments provided for in the HSE Service Plan to address demographic pressures; and
- the costs in 2009 of the Constitutional Referendum on Children’s Rights to take account of the later than expected timetable.
These estimated savings arise from the range of initiatives relating to public service numbers management announced recently and in the Supplementary Budget.
OTHER DEPARTMENTAL SAVINGS
Environment, Heritage & Local Government - Principally savings on the Exchequer contribution to the Local Government Fund.
Education & Science - Savings include reductions in funding for the third-level sector; general efficiencies in the administration and operation of the school transport scheme from non-payment of a compensatory allowance to private contractors who were previously availing of the fuel rebate scheme; and savings on teachers’ pay from the suspension of awarding allowances for Posts of Responsibility in schools as vacancies arise, as part of the general moratorium applying in the public sector.
Agriculture, Food & Forestry - Savings include reductions in the rate of payment under the REPS Scheme; abolition of the Fallen Animals Scheme; and estimating adjustments across a range of areas.
Community, Rural & Gaeltacht Affairs - Savings across various areas, including supports for the Community and Voluntary sector and local and community development programmes.
Transport - Reduction in national roads maintenance grants to the National Roads Authority; and reduction in Exchequer subvention payments to CIÉ for provision of public transport services.
Defence - Savings include reduced costs of the Chad mission consequent on its changeover to a UN mission from March 2009, together with reduced fuel and other costs and other economies.
Communications, Energy & Natural Resources - Savings include a €5m reduction in the allocation for RTÉ, An Post and the Broadcasting Fund, reflecting lower receipts from the broadcasting licence fee, and general reductions on other programmes.
OTHER AREAS
Incentivised Scheme of Early Retirement in the Public Service
To reduce the public service pay bill and facilitate a permanent, structural reduction in the numbers of staff serving in the civil service, local authorities, the health sector, non-commercial state bodies and certain other areas of the public service, the Government has decided to offer an early retirement scheme for certain civil and public servants aged 50 and over. The details of the scheme are set out in Annex D which is available on the Department of Finance’s website at www.finance.gov.ie
Special Civil Service Incentive Career Break Scheme and Shorter Working Year Scheme
The Government has also decided to offer civil servants two new work-life balance schemes. A Special Civil Service Incentive Career Break scheme is being introduced to facilitate civil servants in taking a career break for 3 years. In addition, the existing ‘Term Time’ scheme is being revised and will now be called the Shorter Working Year scheme. Further details are set out in Annex E which is available on the Department of Finance’s website at www.finance.gov.ie.
Activation / Re-skilling and Pilot Training Scheme for Workers on Short Time
The Departments of Enterprise, Trade & Employment, Education & Science and Social & Family Affairs have agreed a joint approach to activation and have produced a range of measures aimed at maintaining people in employment, re-skilling and facilitating better access to allowances, while avoiding undue negative impacts on vulnerable individuals. The measures are set out in detail in Annex F which is available on the Department of Finance’s website at www.finance.gov.ie.
Pension Related Deduction for Public Servants
Changes to ameliorate impact of deduction on lower paid public servants, partly offset by increase on higher earnings, this will cost €100 million in 2009 and €150 million in a full year.
Existing arrangement
- first €15,000 of earnings – 3%,
- €15,000 to €20,000 of earnings – 6%,
- earnings over €20,000 – 10%.
New arrangement
- first €15,000 of earnings exempt,
- 5% on next €5,000 of earnings,
- 10% on earnings between €20,000 and €60,000 and
- 10.5% on earnings above €60,000
It is proposed to transfer to the Exchequer the assets and liabilities of certain pension funds in Universities and non commercial State agencies. The liabilities of the funds at the end of 2008 are estimated to be approximately €3 billion with the assets valued at €1.7 billion at that time. The current classification of these funds under EUROSTAT rules is such that the transfer of the assets of the Universities’ funds and the SSB funds established under Trusts would impact positively on the General Government Balance (GGB) when received. The initial revenue and subsequent investment return would be offset in the future by the payment of pension benefits which would be recorded as Government expenditure at the time of payment.
Legislation to give effect to this will be required. The assets will be managed as part of the NPRF.
Gross Voted Capital expenditure in 2009 has been reduced by €624 million relative to the pre-Supplementary Budget position. These savings are offset by an additional allocations (as set out below) of €48 million to bring the overall Capital reduction to €576 million in 2009. While the detailed breakdown of capital allocations is as set out in the Supplementary Budget tables, the key changes arise in the following areas:-
- Transport – €300 million savings, including a reduction of €150 million or 8% in investment in roads. In 2009, this reduction is applied mainly to regional and local roads. Expenditure on national roads is substantially contractually committed to allow for the on-time and on-budget completion of the inter-urban motorway network by end 2010 as promised. There will also be some deferrals and rescheduling of public transport projects.
- Environment, Heritage & Local Government – €200 million savings, principally arising in the areas of Social Housing and Water Services Infrastructure as well as other programmes.
- Education & Science – €54 million savings, mainly in the Primary and Post-Primary School Building Programmes (€30 million) and the Third Level Capital Programme (€24 million).
- Agriculture – a reallocation of €23 million from Current to Capital towards provision for the Farm Waste Management Scheme to bring the total allocation to €220 million; and other reallocations across a range of capital expenditures including a cut in the provision for afforestation requiring a reduction in the rate of forestry premium;
- Communications, Energy & Natural Resources – €15 million savings, including a reduction of €13 million in the allocation for Sustainable Energy and Energy research programmes.
- Enterprise, Trade & Employment – €25 million additional allocation in 2009 in respect of the Enterprise Stabilisation Fund (see separate heading below).
- Other areas – capital savings of €55 million in other areas.
An Enterprise Stabilisation Fund is being established in the Department of Enterprise, Trade & Employment to provide targeted support to indigenous companies to assist them in the exceptionally difficult business environment in which they are operating at present. The operational details of the Fund are set out in Annex G which is available on the Department of Finance’s website at www.finance.gov.ie.
Source: Department of Finance
