No surprises, no budget U-turns, and no major sweeteners

UNVEILING the finance bill yesterday, Michael Noonan made the distinction between his version and those produced by his predecessor Charlie McCreevy, “when it was almost a second budget”.

This document had no major surprises, no budget U-turns, and no major sweeteners thrown in to win support from a hurting public. It was, the minister said, rather boringly outlining in more legal detail the measures announced by him on the floor of the Dáil last December.

Mr Noonan was trying to play down the significance of the legal document and avoid rekindling the angry debate about the austerity measures announced almost two months ago.

He wasn’t going to remind anyone of the 2% VAT increase or the range of indirect taxes that made up part of the €3.8bn adjustment. Instead, he used yesterday’s press conference to focus on the message the Government is driving hard these days: That job creation is its top priority.

“The main thrust of the budget was about jobs and economic growth,” he said.

However, despite his best efforts to convince us otherwise, the complex legal document contains little in the way of the innovative thinking needed to create jobs with the scarce resources available.

The big job creation idea contained in the bill is the special assignee relief programme, a tax exemption for top executives who decide to base themselves in Ireland.

Mr Noonan said if R&D and financial services companies could get a “key person in”, it would have the potential to trigger the creation of about 30 or 40 jobs. The incentive will mean that 30% of everything they earn over €75,000 will be exempt from tax.

In what amounted to an admission that income tax rates were too high, Mr Noonan said: “Key executives are not coming into the country because of the income tax they have to pay.”

The measure is likely to prove the most controversial when the finance bill is debated in the Dáil next week.

Sinn Féin said the bill was “straight out of the book of Charlie McCreevy”, while Richard Boyd Barrett of the United Left Alliance said there were “echoes of going down the same road” as Fianna Fáil went during the boom.

Mr Noonan believes it will only apply to about 100 workers in the first four years, meaning it could potentially create up to 4,000 jobs at a relatively low cost to the exchequer.

However, even Mr Noonan admitted it was not going to be the answer to the unemployment crisis: “We’ll see how it goes. If it works, it works, if it doesn’t it doesn’t.”

There’s also a new incentive to support Irish sales in the high-growth Bric countries of Brazil, Russia, India, and China, as well as South Africa.

The foreign earnings deduction will allow Irish companies expanding into these markets to deduct €35,000 per annum under the scheme.

Mr Noonan said export-related growth had been identified as the best way of bringing the country out of this crisis.

However, some experts would argue that exports were doing all the “heavy lifting” on job creation while austerity was destroying domestic growth.

By introducing tax reliefs for mortgage holders who bought between 2004 and 2008 and are now in negative equity, the Government is offering some cushion to ease the burden on hard-pressed families.

However, that’s not going to ease their anger when they are told that income taxes are too high for top earners but will remain the same for those on low or middle incomes.

Under the measures announced yesterday, a top executive arriving to work here on €500,000 will save €52,000 a year on taxes.

Everyone else will have to do with the generous concession that VAT — contrary to what was announced in the budget — will not now apply to loaves, wraps, and pitta breads.