Budget add-ons good for workers, gay couples and business sector

Just when you might have thought you’d heard the last of the budget, the Finance Bill appears.

Despite all the budget day theatre, the budget speech given by Finance Minister Michael Noonan in Dáil Eireann has no legal standing.

All the things he announced, the cuts in universal social charge, new tax breaks for the self-employed and all the rest, can’t happen unless they are included in the Finance Bill. That piece of legislation was published late last week.

Running to just over 100 pages, the bill has to be passed by the Oireachtas and signed by the president before the end of the year.

That’s to keep us in line with the other EU member states in the eurozone; all the eurozone countries have to follow similar procedure when they go to change their tax laws.

European law does allow for an extension of the deadline if an election is called shortly after budget day, but it looks increasingly unlikely that Ireland will be availing of that option this year.

The main thing to check for in a Finance Bill is that all the good stuff announced on budget day is included. By and large it is.

The new rules for the universal social charge, which will put anything up to €900 extra a year into wage earners’ pockets is safely provided for.

So too is the new €550 tax credit for the self-employed, designed to bring their tax treatment into line with the tax treatment of employees over a three-year period.

High-tech companies, indigenous or otherwise, will be interested in the details of the Knowledge Development Box (“Box” is jargon for a special rule) which provides for a special corporation tax rate of 6.25% on profits from the manufacture and sale of goods with high-tech content.

This Knowledge Development Box was designed to new international tax standards promoted by the OECD.

It remains to be seen whether its conditions are too restrictive to provide an additional lure to the mobile multinational sector to invest here but I think it will certainly be of assistance to our domestic high-tech sector.

Knowledge Development Box aside, Ireland still has a strong high-tech tax offering and the Finance Bill doesn’t dilute that.

There is good news to be had as well in some of the additional measures in the Finance Bill that weren’t already announced in the budget.

The exemption granted from PAYE to employee vouchers, which currently stands at €250, is to be doubled to €500.

Sadly, this increase won’t have effect for Christmas 2015 as generally speaking the Finance Bill measures kick off from January 1, 2016. At the same time, it will allow employers a little more tax leeway if giving a gift voucher to staff members next year.

Finance Bills must also reflect other legal and social developments in the country during the year, if those developments have tax consequences.

Undoubtedly, the most significant piece of social legislation in 2015 was the marriage equality referendum.

The Finance Bill provides that couples in same-sex marriages will have the same tax allowances and entitlements as all other married couples.

It does so by simply stating that where necessary, references to a man and woman, or to a husband and wife, will be understood the same way for tax purposes.

The other big legal and social development this year was water charges, and a special provision was deemed necessary to ensure that the Water Conservation Grant would be treated as tax exempt.

Not all the changes are as straightforward or as elegantly expressed. Well over 100 specific areas of tax law are adjusted or modified in some way, and one of the recurring themes in these detailed adjustments is to ensure that Irish tax legislation is in accordance with EU treaties and other international agreements.

Another theme emerging is a focus on anti-avoidance; special rules which are introduced to ensure that tax reliefs or exemptions are not being used in a way the Government tells us it hadn’t intended.

The Revenue Commissioners are given extended powers in the Bill to obtain information on taxpayers, to require taxpayers to retain records for inspection, and to cancel business VAT registrations where they believe those registrations are leading to a loss of revenue to the Exchequer.

Whether or not all of these new powers are appropriate is a matter for debate, as some would appear to include information trawls and confidential enquiries involving third parties. Either way, their inclusion in the Finance Bill confirms Revenue’s position as one of the most powerful agencies in the State.

There are special procedural rules for Finance Bills in the Houses of the Oireachtas to enable them to be passed with minimum delay.

There will still be opportunity to bring in additional tax changes, perhaps to help tackle the housing crisis as was mooted prior to budget day.

But in practice the opportunities to do so are limited. As a result, it is almost unheard of for the substantive measures in any Finance Bill to be changed once they have been published. It is the last word on the budget.