KPMG Partner Tom Woods summarizes the general direction of the 2023 budget
The 2023 budget was introduced by the Minister of Finance as a “cost of living budget” with the stated aim of helping individuals, families and businesses cope with rising prices.
The Minister also acknowledged the need to find a balance between helping citizens in the face of the rising cost of living and guaranteeing the stability of public finances in the face of possible future economic shocks. To this end, the Minister confirmed that €2 billion this year, and €4 billion in 2023, will be directed to the National Reserve Fund.
In summary, the tax measures announced amount to €1.1 billion out of an overall budget envelope of €11 billion.
To help individuals and families deal with inflationary pressures, a number of tax measures have been announced, including the following:
- An increase in the standard rate threshold from €3,200 to €40,000
- An increase in the 2% USC rate band from €21,295 to €22,920
- Increases in personal, salaried, earned income and home help tax credits
A temporary business energy support scheme is to be put in place to help businesses over the coming months. Eligible companies will be able to recover 40% of the annual increase in their energy bills up to a monthly cap of €10,000 per transaction.
The Minister highlighted the importance of tackling the housing crisis and climate change, resulting in a number of measures announced, including:
- The extension of the Help-to-Buy system until the end of 2024
- The introduction of a rental tax credit of €500 per year
- Reinforcement of the pre-letting charges regime for lessors
- The introduction of a tax on vacant housing
- An increase in the carbon tax on petrol and diesel of €7.50/ton offset by a reduction in the fee from the National Agency for Petroleum Reserves
- The introduction of an accelerated depreciation scheme for farmers for the construction of modern slurry storage facilities
For the future, the Minister has undertaken to prepare a medium-term roadmap for the reform of personal taxation following the conclusions of the recent report of the Commission on taxation and social protection.
The Minister also reaffirmed Ireland’s commitment to the OECD International Tax Agreement by ensuring that the minimum effective tax rate for businesses with a turnover of over €750 million is set at 15% and seriously considering options for moving to a territorial corporate tax system.
The total budget envelope of €11 billion was provided against an economic backdrop of inflationary pressures (projected at 8.5% for 2022) and slowing domestic growth (projected modified domestic demand of only 1. 25% for 2023).
With the focus on cost of living measures, it was widely expected that there would be a limited number of tax measures to maintain our attractiveness to foreign investment and entrepreneurs in the year to come. It is hoped that these policy objectives will receive attention in future budgets.