BUDGET 2013 has continued on a similar path as Budget 2012 with the introduction of further incentives for the SME and agri-food and farm sectors.
Certain measures have been introduced which could be perceived as being aimed at the wealthy, however some may consider that the minister has not gone far enough in targeting those who can afford to pay the most.
There is clarity in the minister’s speech on the detail of the much speculated property tax. The new “local property tax” will be administered by the Revenue Commissioners with the funds earmarked for the local authorities.
A rate of 0.18% will apply to properties with a value up to €1m and for properties valued over €1m a rate of 0.25% will apply on the excess.
This is a welcome relief for the “mansion house owners” as it had been speculated that a flat 0.25% rate would apply to the total value of properties over €1m. Revenue has stated it will be a self-assessment tax but at the same time will issue “guidance” on the various valuations.
It will be interesting to see how the “self-valuation” will work in practice as one can imagine there may be significant diversions of opinion between Revenue and home owners on the valuation of their properties. On a positive note for those owing second homes, the NPPR charge of €200 will be abolished from Jan 1, 2014.
While the minister has kept his promise of not altering the income tax bands and rates, he has effectively introduced a number of stealth taxes through abolishing the PRSI exemption which will cost every PAYE worker €264 per year, increasing the Dirt rate from 30% to 33% and bringing unearned income (such as rents, interest, dividends) within the scope of PRSI from 2014.
He has continued the trend of the last few years by increasing the capital taxes rates and reducing the lifetime exemptions. Over five successive budgets the capital gains tax and capital acquisitions tax rates have increased from 20% to 33%. In addition, over the same period the thresholds at which capital acquisitions tax becomes payable have decreased by almost 60%.
There was some welcome news for the SME sector as the minister announced that the existing relief from corporation tax for start-up companies in the first three years of trading will be extended to allow any unused relief to be carried forward beyond the initial three-year period.
The volume basis relief for R&D has been doubled and relief will now be available on the first €200,000 of qualifying R&D expenditure. To assist companies in accessing funding, the employment and investment incentive scheme which had been due to expire in 2014 has been extended to 2020.
In recognition of the importance of agri-food and farming sectors to the economy, the minister has extended the various stock relief measures for farmers in general, young trained farmers and registered farm partnerships for three years to Dec 31, 2015. He has also widened the definition of registered farm partnerships, which up to now was limited to milk production partnerships, to now include other production partnerships.
The minister has also introduced relief from capital gains tax for the three-years ending on Dec 31, 2015 to encourage the disposal of farmland for restructuring purposes. These measures are expected to encourage the creation of additional jobs in the farming and agri-food sector and improve farm savings.
On pensions it has been confirmed tax relief will continue to be available at the marginal income tax rate and that the pension levy will not be renewed after 2014. However, comments made by the minister indicate significant changes will come through from Jan 2014 in respect of larger pension funds (generating more than €60,000 in pension income a year.
* Mike Sheehan, partner taxation services, Deloitte
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