Introducing Tuesday’s Budget, Finance Minister Michael Noonan highlighted improvements in the economy over recent years.
Ireland is forecasted to be the strongest growing economy in the EU for 2014 and 2015, with 2015 growth exceeding 6%.
Unemployment, at 9.4%, is projected to fall to 6.25% by 2021.
Debt to GDP is projected to fall to 97% for 2015, to 93% of GDP by the end of 2016, and to 80% by 2021.
But our national debt is increasing, with a projected 2016 exchequer borrowing requirement at €1.7 billion.
The positive spin comes from improvement in the earning ability of our economy.
As our economy’s income creation increases, so does ability to repay our debts or — as the Minister has indicated — our debt as a percentage of earnings has decreased.
Before we clap ourselves on the back for increasing national borrowings for 2016, we should however note the 2015 interest cost for national debt is close to €7bn.
Although economic performance and tax receipts for 2015 are well ahead of target, the budget package stuck to the well flagged €1.5bn mark, remaining in line with the EU pact on stability and growth.
It is the largest single budget in five years, but the benefits in terms of tax cuts and additional services pale alongside the high cost of servicing our national debt.
Universal social charge rates have reduced at all income levels below €70,000.
For the first time, a new earned income credit of €550 is granted to the self- employed and company owner/directors who have previously not had access to the employee tax credit.
These two changes alone deliver substantial tax savings.
The home carer’s credit has increased from €810 to €1,000, with the earnings threshold for this credit also increasing, from €5,080 to €7,200.
This will be of particular benefit to many one-income married couples or civil partners, where one spouse cares for young children or an elderly relative.
For low earning employees, earnings less than €356 per week are not liable for PRSI, however once an employee earns more than €356 per week, the totality of their income becomes liable for tax at 4%.
Budget 2016 has brought in a PRSI credit to reduce this step effect, such that employees whose salaries rise by a small amount over €356 per week will not suffer unduly as a result of the application of PRSI on all their income.
The Budget announced an increase in minimum wages from €8.65 to €9.15 per hour.
This will increase the cost to some employers, however the threshold for the low rate of employers PRSI (8.5% rate) has been increased to €376 per week, from €356 per week, to mitigate against the higher rate of employers’ PRSI that would otherwise apply as a result of the minimum wage increase.
In gift and inheritance tax, the Group A tax-free threshold, which is predominantly applicable to transfers from parents to children (as well as certain transfers involving favourite nieces/nephews), has increased substantially, from €225,000 to €280,000.
From a farming perspective, it’s ironic that this relief is likely to be of most benefit to successors taking over small parcels, where agricultural relief or business relief would not otherwise be available.
Minister Noonan acknowledged the role of agriculture in supporting over 169,000 jobs across the length and breadth of the country, and generating 12% of our exports.
Tax relief granted via stock relief has in all cases been extended for a further three years.
The budget introduced a Succession Transfer Proposal which appears very much in line with the proposal by IFA of a structured phased partnership approach to family farm transfers.
Individuals may enter a partnership where a farm can be managed through the partnership, with a view to the ultimate transfer of the farm within ten years.
To incentivise such a scheme, an income tax credit worth up to €5,000 per annum will be allocated to the partnership and split according to the profit sharing ratio.
It’s likely to be well into 2016 before this comes on track, as it is s subject to EU approval.
For hauliers, there is great news, with an announcement of a substantial reduction in the road tax, from a current maximum of €5,195 to a maximum of €900.
This should be of help to our agricultural industry, which is heavily reliant on the transport sector.
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