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| Department of Finance, Merrion Street, Dublin,
Ireland |
BUDGET 2007
Finfacts summary page of Tax and Social Welfare
and Other changes
Minister's Speech
1.
Case Examples (new window)
2.
Case Examples (new window)
Budget 2007 Documents
Finance Bill 2007
(published Feb 01, 2007)
Finfacts Tax Guide 2007
Comment: Budget 2007 - More than meets the eye? - - Austin Hughes, Chief
Economist IIB Bank
Comment: The 2007 Budget does not get an unqualified economic approval
but it comes close - - Pat McArdle, Chief Economist Ulster Bank
The following are 3 relevant articles on
the current state of the Irish economy and the plans or lack of them to
put in place reforms to better meet challenges in coming years, when the
temporary reliance for prosperity on an unprecedented property boom and
US investment, will end:
Goodbody says Irish tax revenues have trebled since 1995;
Property-related taxes in Ireland now account for at least 17% of total
revenues - up from 4% ten years ago
Comment: Irish Media dances to a self-serving politicians' tune on
Stamp Duty while State collects average of €100,000 from every new house
built & farmers make killings from development land
Irish Economy
2006 and Future of the Celtic Tiger: Putting a brass knocker on a barn
door!
COMMENTS FROM ERNST & YOUNG TAX EXPERTS:
Income Tax – Jim
Ryan, Tax Partner
"While
the reduction in the income tax rate to 41% is welcome it is
disappointing that the Minister did not use the opportunity of
significant surpluses to meet the commitment made in the Agreed
Programme for Government to reduce to 40%. However, most people will be
happy with the increases in tax credits and tax bands."
Tax Credit for
Research and Development – Joe Bollard, Tax Partner
"The
Minister announced some welcome improvements to the R&D tax credit
system. However, these changes fall significantly short of making the
Irish regime competitive relative to the systems available overseas.
Ireland has a proven track record in using tax incentives in attracting
high-quality foreign investment to Ireland. We encourage the Minister
to urgently consider investment in a long-term tax incentive package
which will promote Ireland as the global centre for innovation and
knowledge based industries."
Business Expansion
Scheme – PJ Henehan, Tax Partner
“The extension of the
relief for a further seven years and the increase in the amount of
funding which companies can raise from BES schemes are welcome. Whether
these changes achieve the objective of freeing up more risk capital for
small businesses is questionable in light of the 2006 Finance Act cap on
investment reliefs available for high income earners. Interestingly, the
annual limit available to investors in Film Investment schemes remains
unchanged.”
Administrative
Burden for Business – David Smyth, Tax Partner
“The Minister’s long
overdue package of measures aimed at reducing the administrative burden
for business will be welcomed especially by small businesses for which
compliance costs represent a significant burden. The removal for start
up companies of the obligation to pay preliminary tax is particularly
helpful as complying with preliminary tax rules can be difficult and
time consuming.”
Environmental Taxes
– Breen Cassidy, Tax Partner
"Motorists are to be encouraged to drive more environmentally friendly
cars following the announcement of a consultation process on the linking
of VRT rates to CO2 emissions. The Minister intends that there should be
some reward in the VRT system for choosing lower-emission vehicles, and
that those choosing higher-emission vehicles should pay more. The
Minister has set out a range of options for discussion in a Budget
booklet that should result in the implementation of a revised VRT system
from the start of 2008."
VAT – Breen
Cassidy, Tax Partner
"The
Minister has announced that a specific measure will be introduced in
2007 to allow VAT deductibility in respect to conference related
accommodation expenses. This is a welcome development which will go some
way to ensuring Ireland is not at a major competitive disadvantage when
attempting to attract the lucrative conference sector business to
Ireland."
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Mortgage interest relief for first-time
buyers to be doubled to €8,000 for a single
person
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Paid maternity leave is increased by 4 weeks
to 26 weeks
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Unpaid leave is also being increased by 4
weeks, to 16 weeks
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Three existing child dependent allowances
replaced by new standard rate of €22 per
child, per week
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Cost of 20 cigarettes to rise by 50 cents
from midnight, raising€112m
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Contributory pension rises to €209.30 per
week, non contributory pension rises to €200
per week
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VRT to be changed from 2008 to reward lower
emissions vehicles
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Motor tax to be 'rebalanced' to reward lower
emissions vehicles
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Top tax rate reduced to 41 per cent
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Lower (20 per cent) tax band widened by
€2,000 a year to €34,000
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Income tax entry point raised to €17,600
(equivalent to €8.65 per hour
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Personal tax credit by €130 to €1,760 a year
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Tax changes to cost Exchequer €1,250m
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In 2007 economy will grow by 5.25 per cent
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Unemployment will remain at 4.4per cent in
2007
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Inflation expected to be 2.6 per cent next
year - Cowen
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Government plans 1.2 per cent surplus in
2007
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Overall spending to grow by 11.5 per cent in
2007
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Capital spending to grow by 13 per cent next
year
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Widowed person's tax credit increased by 10
per cent to €550 per annum
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Extension of business support grants for 7
years to encourage enterprise
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Increase in small company liability
threshold from €50,000 to €150,000
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€70 million tax credits for investment in
research and development
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Sports clubs purchasing land for sporting
activities to be exempt from stamp duty
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€270 million allocated to buy carbon
allowances up to 2013
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€10 million for Local Government fund for
cleaner water projects
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New mandatory labeling system for car
emissions
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Greener homes scheme funding to be increased
by €20m until 2009
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Sustainable Energy Ireland to get €3 million
for renewable energy research
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Grant aid for biofuel producers
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Excise on kerosene to be abolished
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Farming reliefs renewed and extended
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Measures to encourage the transfer of farms
to younger farmers
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€1.4bn social welfare package, brings
overall social welfare spend to €15.3b
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Annual respite care grant rises by €300 to
€1,500
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Disability sector gets €100m for residential
respite and day places
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€255m for homecare packages, home help hour
and respite care
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0.5 per cent increase in health levy on
earnings over €100,000
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Extra health spending brings annual spend on
sector to almost €15bn
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Minister for Health to restrict sales of
cigarette pack sizes less than 20
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Mortgage interest relief to apply to buyers
in the first seven years of their loan
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Child benefit will be increased by €10 per
month for each of the first and second
qualifying children to €160 per month
Return
to Top
Budget 2007 documents (published on 6
December 2006) are available below. They are also available in
a range of formats.
The Exchequer Returns for 11 months to
November -published on Dec 04:
Property boom boosts Irish public finances to highest surplus since
heyday of Celtic Tiger in the late 1990s
There are further articles down the page.
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Goodbody Stockbrokers |
Irish Government’s Spending Plans 2007; €54 billion budgeted -
additional €3 billion is for spending on day-to-day services and
almost €1 billion on capital services
Pre-Budget Report: Cowen presents optimistic outlook on Irish economy in advance of Budget;
Plans for Surplus
Return
to Top
For nine years, American historian Arthur Schlesinger Jnr wrote, that
the government had treated business as though it had “discovered the
philosopher’s stone which could transmute the uncertainties of the
capitalist system into permanent prosperity.”
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Goodbody Stockbrokers |
Schlesinger was referring to the Roaring Twenties and in the ninth year
of the present Irish Government combination, with an Exchequer awash
with cash, and SSIA partytime just getting underway, it’s becoming
evident to more than just economists, that the free lunch has yet to be
invented.
There is of course no path to
permanent prosperity and in the following
article, we focus on whether the opportunity presented by a unique
period since independence, has been used to put significant reforms
in place to enable the Irish economy to overcome challenges in the
next decade when the property boom that is funding almost 20% of
annual public spending will end and more than 100,000
jobs will be shed in the construction sector alone:
Twenty Irish residents who had income in excess of €500,000 in 2003,
paid zero income tax; 1,059 people who earned more than €100,000
paid less than 5% tax
Central Bank Governor says era of exceptionally strong Irish economic growth is over; Structural change needed to maintain strong economic position
Irish Tax Data 2006: Landlords, Lawyers, Medics, Accountants/Tax
Consultants, Dentists, Farmers and Chemists dominate top earning
rankings
Davy Stockbrokers report says severe downturn in construction sector
would have dramatic impact on public finances; Tax revenue from the
property market has tripled since 2002
Department of Finance Ready Reckoner for Budget 2007
Ireland received net income of €1.4 billion from the European
Union in 2005 - Per capita income of €350 highest of pre-May
2004 EU15
Tax revenues on the rise in many OECD countries, OECD report
shows; Irish tax burden virtually unchanged in period 1995-2005
Irish public service payroll increased by 6,000 to 355,000 in
year to June 2006: Up 53,400 since December 2000
Ireland 2006 - A Banjaxed System of Public Governance where the
Buck Stops Nowhere
Reform Irish Style: Take action only in Response to a
CRISIS...sorry...a DIRE CRISIS
Our Petro-like Economy
The Irish Government collects
about an average of €100,000 in
taxes and levies from every new housing unit built in the State.
In November 2004, the Minister for Finance put the percentage at
28% and the Construction Industry Federation puts the amount
above 30% of the average new house cost.
Property-related
Exchequer receipts will fund about 20% of total (current and
capital public) spending this year and the bonanza is continuing
on a staggering scale.
According to the Bank of Ireland's
Irish Property Review,
the consensus estimate for house
completions in 2006 (85,000 – 90,000) is now too low.
Completions in the first half of the year amounted to a 24%
advance on the same period of 2005 and the conservative estimate
for the year as a whole now looks set to reach 95,000, but could
go as high as 100,000. The latter figure would represent around
24 completions per 1000 people, an astonishing figure given that
the EU norm is around 5 per head of population. It seems likely
that total completions will decline somewhat in 2007.
Each additional housing unit built is
more manna from heaven for the public finances.
On Aug. 25th, the Central Bank announced that
almost 80% of the increase in Private Sector Credit in the year to
June 2006, was property-related.
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