Budget 2016

Budget Day has come and gone for another year and here in the Chambers Ireland office, we’ve broadly welcomed the Government’s commitment to support our entrepreneurs and businesses.
At long last, we have a budget that recognises the role that entrepreneurs and small businesses play in driving economic growth. Two particularly welcome measures are the first steps towards putting the self-employed on an equal footing with the PAYE worker, and Government’s commitment to address the high costs of childcare. These important measures will help businesses in all regions of the country and will support our indigenous economic development.

The decisions made by Government in yesterday’s budget are the first steps towards fairer and more equitable treatment of the self-employed, who have long been discriminated against when it comes to taxation. However, one noticeable omission in the budget related to the 3% USC surcharge the self-employed earning over €100,000 are obliged to pay over and above their PAYE counterparts. We had hoped that with the focus on introducing parity between the employed and self-employed would follow through to a movement towards equity at the top rates of USC. Unfortunately, this wasn’t the case.

Elsewhere, the reduction of CGT from 33% to 20% will equally support investment into high-potential Irish businesses and reward our entrepreneurs and job creators. That being said, the threshold of €1 million is very low and will not significantly encourage new investors. likely to exclude many companies whose assets are of significantly higher values. So while it’s a welcome step, the Government should look to to further raising the threshold over the coming years

However, one noticeable omission in the budget related to the 3% USC surcharge the self-employed earning over €100,000 are obliged to pay over and above their PAYE counterparts. We had hoped that with the focus on introducing parity between the employed and self-employed would follow through to a movement towards equity at the top rates of USC. Unfortunately, this wasn’t the case.

One of the crucial areas that many groups were hoping would be dealt with in this year’s Budget was housing. There is no easy solution to the problem of a lack of supply of housing, and in some ways it is a positive that we didn’t see a knee jerk reaction that might further distort the market in the future. Nonetheless, we had sought a reduction to 9% in the rate of VAT applied to residential housing. The VAT is ultimately paid by the home buyer, and reduction in this could have ameliorated some of the problems of lack of affordability until longer term supply side solutions are introduced.

Last of all, we must be careful not to repeat the mistakes of the past and excessively erode the tax base or set unrealistic expectations for the future. The reductions to USC accounted for more than 75% of the total Budget package on tax measures. Maintaining as broad a tax base as possible will be important for the sustainable management of public finances in the years to come.