The Minister for Finance Michael Noonan and the Minister for Public Expenditure and Reform introduced the budget and spending measures proposed for 2017. Minister Noonan set the scene stating that the taxation and spending measures would be split between a €300M reduction in tax and a €1bn increase in spending.
In tax terms most of the announcements had been well flagged in advance with the main provisions being:
Personal Tax
USC rates decreased to :
0.5% on first €12,012,
2.5% on income between €12,013 and €18,772 and
5% on income between €18,773 and €70,044.
No change in top rate of USC at 8% and no change in top rate of USC of 11% for self employed individuals with income in excess of €100,000
Earned Income Credit introduced in 2016 for the self employed will increase from €550 to €950.
Exemption from Income Tax for income from renting a room in your home is increased by €2,000 to €14,000 from 2017.
The deduction for interest on rented residential property will increased to 80% in 2017 with a commitment that the Finance Bill will contain measures to increase this each year by 5% until full relief applies.
Business Tax
VAT remaining at 9% for the tourism industry.
Farmers can step out of income averaging immediately and defer tax liability to subsequent years.
Continued commitment to the 12.5% Corporation Tax rate and also a review of the Corporation Tax code to be completed to ensure that the Corporation Tax code is in line with OECD model of taxation including recommendations on Base Erosion Profit Sharing (BEPS).
Capital Gains Tax
A reduced rate of Capital Gains Tax at 10% to apply on the disposal of a business up to a lifetime limit of €1m.
Capital Acquisition Tax
Thresholds increased as follows:
Group A €280,000 to €310,000
Group B from €30,150 to €32,500
Group C from €15,075 to €16,250
First Time Buyers Scheme
A scheme was announced whereby first time buyers up to €400,000 would be able to reclaim a maximum of 5% of the purchase price as a contribution to the deposit required under Central Bank rules. The scheme will operate as a refund of Income Tax already paid over the previous 4 years.
Brexit
Both ministers gave time to Brexit and set out that the Government intends to introduce measures to support industry to meet the challenges that Brexit will bring. Included in this was a commitment that Enterprise Ireland and the IDA will get additional funding to assist Irish businesses to drive exports and foreign businesses to set up in Ireland. There was also a commitment that several government departments will get funding to set up Brexit teams who will deal with the mechanics of Brexit.
As always Budget 2017 is an announcement of intention and the legislation to put the intention into law will be contained in Finance Bill 2017 which will be published next week. The devil is in the detail and while Budget day has passed without much furore the Government will need to ensure that the detail of Finance Bill 2017 meets the agreement of all partners in Government and satisfies the confidence and supply agreement entered into with Fianna Fail.
Read our full Budget Highlights in this PDF and watch the video online