Source: http://taxinstitute.ie/TaxPolicyandPractice/IrishTaxPolicy/ProgrammeforGovernment.aspx
Timestamp: 2019-04-22 19:56:55+00:00

Document:
The Fine Gael / Labour coalition published their Programme For Government on 6 March 2011 setting out the broad policy, including tax policy, of the Irish Government for the next 5 years. A number of key tax issues from the Institute’s representations are reflected in the Programme for Government, in particular those relating to a simpler tax regime for smaller businesses, those on R&D tax relief and the importance of maintaining and eventually reducing the marginal income tax rate.
On this webpage you will find more details on the main tax proposals in the Programme for Government by clicking on the links below. These are compared with the commitments under the EU/IMF Programme of Financial Support for Ireland.
• Keep the corporate tax rate at 12.5% (Fine Gael and Labour both committed to this).
• Subject to completion of a cost benefit analysis, accelerate capital allowances on software purchases against corporation profits tax from 8 to 3 years (also in Fine Gael’s manifesto).
• Give companies the option to offset the R&D credit against Employers’ PRSI as an alternative to Corporation Tax (also in Fine Gael manifesto).
• Extend the R&D tax credit to the games industry in order to attract game developers and grow the game sector in Ireland (Labour had included in their manifesto).
• See also R &D credit under ‘Jobs and Small Businesses’ below for more.
• Promotion and support of investment in technology research, development and commercialisation beyond basis research.
No specific proposals on corporation tax.
Revenue Commissioners to examine the feasibility of introducing – on a revenue neutral basis – a Single Business Tax for micro enterprises (with a turnover of less than €75,000 per annum) to replace all the existing taxes on sole traders and small businesses to cut compliance costs and make starting a business much less daunting.
• Halve the lower 8.5% rate of employer PRSI up to end 2013 (this applies in respect of jobs paying up to €356 per week).
• No increase in the standard 10.75% rate of employer PRSI.
Both of the above were included in Fine Gael’s manifesto.
• Companies will be able to offset the R&D credit against employers’ PRSI as an alternative to an offset against corporation tax.
All of the above were included in Fine Gael’s manifesto.
As under ‘Corporation Tax’ above, subject to completion of a cost benefit analysis, it is proposed to accelerate Capital Allowances on software purchases against corporation profits tax from 8 to 3 years. This would also apply to the capital allowance deduction for income tax in the case of sole traders.
Fine Gael had included this proposal in their manifesto.
Establish a Tax and Social Welfare Commission to examine entitlements of self-employed and the elimination of disincentives to employment. Fine Gael proposed this in their manifesto in which they stated that this could help entrepreneurs and new business start-ups by simplifying tax compliance and continuing social welfare cover for a limited period.
Limiting the increase in the top rate of VAT to 23% (currently 21%). Labour had proposed a 1% increase in their manifesto while Fine Gael had proposed an increase in the rate in line with that provided in the National Recovery Plan (i.e. 1% increase in 2013 to 22% and an additional 1% increase in 2014 to 23%). It would seem that the Programme for Government is following the Fine Gael / National Recovery Plan in this regard.
A two year cut in the 13.5% rate of VAT to 12% up to end 2013. This was also included in Fine Gael’s manifesto.
Maintain the exemption from VAT for service companies that export more than 90% of their output. Fine Gael also included this proposal in their manifesto.
Review the USC. No further details are provided in the Programme for Government. In Fine Gael’s manifesto they stated that they would review the effect of the USC on work incentives and employment participation for Budget 2012.
Labour stated they would reform USC to alleviate for families hardest hit and that they would extend the 10% USC to all income over €100k.
Maintain the current rates of income tax together with bands and credits. No increases in the top marginal rates of taxes on income. Fine Gael had also stated this in their manifesto while Labour proposed no increase in income taxes on earnings under €100k.
A lowering of personal income tax bands and credits signalled for Budget 2012, Budget 2013.
Reduce, cap or abolish property tax reliefs and other tax shelters which benefit very high income earners.
Fine Gael also proposed the above subject to the forthcoming impact assessment study.
Labour proposed eliminating tax expenditures including legacy property reliefs and also the curtailment of other (unnamed) minor reliefs.
Implement a minimum effective tax rate of 30% for very high earners. This currently applies to those earning over €400,000.
In their manifestos, both Fine Gael and Labour proposed that the income level at which the minimum effective 30% tax rate applies be reduced to €250,000.
Ensure that tax exiles make a fair contribution to the Exchequer. Fine Gael proposed the introduction of new residency rules for tax exiles (as outlined by the Commission on Taxation). Labour proposed strengthening Revenue action to reduce tax-evasion by tax exiles.
Publish cost-benefit analyses for major infrastructure proposals and “tax expenditures” in advance of Government approval. This was contained in Fine Gael’s manifesto.
"A reduction in general tax expenditures" signalled for Budget 2012 and Budget 2013.
Consider a site valuation tax taking account of the significant number of households in mortgage distress and the need to provide local government with a reliable stream of revenue.
(c) The option of a local “site sale profits tax” on the profit made from the site value on the sale of a residence (sales proceeds, less cost indexed by inflation, less stamp duty paid and less home improvements).
Introduction of a property tax signalled for Budget 2012.
Increase in property tax signalled for Budget 2013.
The Programme proposes the creation of a new body, Irish Water, to take over responsibility from the separate local authorities for Ireland’s water infrastructure and the introduction of a fair funding model to deliver clean and reliable water. Water meters are to be installed in every household in Ireland allowing a move to a charging system that is based on use above the free allowance. This is in line with Fine Gael’s proposals in their manifesto however Labour had indicated in their manifesto that they did not favour water charges.
“Cap taxpayers’ subsidies for all future pension schemes for politicians (and indeed for everybody) that deliver income in retirement of more than €60,000.” This was also in Fine Gael’s pre election manifesto. They provided that this measure would be subject to transitional arrangements for those approaching retirement.
Reductions in private pension tax relief and public service pension adjustments signalled for Budget 2012 and Budget 2013.
Both parties proposed changes to CGT and CAT in their manifestos (see below) however there is no mention of these changes in the Programme for Government.
Reform of capital gains tax and capital acquisitions tax signalled for Budget 2012.
Enact legislation to amend tax and social welfare law in respect of civil partnerships. Both Fine Gael and Labour had included proposals to this effect in their manifestos. It is quite likely that this legislation may be contained in a second Finance Act in 2011.
There is very little detail in the Programme on carbon tax, other than to provide specifically for an exemption for farm diesel from further increases in carbon tax.
Increase in carbon tax signalled for Budget 2012.
The establishment “of an independent Fiscal Advisory Council (FAC) separated from fiscal decision makers in Government that would undertake official fiscal macroeconomic projections and monitoring.
This is in line with recommendations made in the report of the Independent Review Panel “Strengthening the Capacity of the Department of Finance” [http://www.finance.gov.ie/documents/publications/reports/2011/deptreview.pdf] published on 1 March 2011.
The FAC functions would include identifying and advising on cyclical and counter-cyclical fiscal policies and structural deficits; the cyclical or temporary nature of particular revenues; and the need to maintain an appropriate and effective tax base.
The FAC will be independent of Government and will report to the Dáil and the public.

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