The Programme for Government runs to 126 pages and this paper is considering the main tax references in the document.
Income Tax and Universal Social Charge (USC)
There will be no change to income tax credit or bands in Budget 2021. It is intended that credits and rate bands will be indexed linked to earnings from Budget 2022, finances allowing.
The earned income tax credit (self-employed) will be equalised with the employee tax credit.
The 3% USC surcharge applied to self-employed income will be abolished over time.
Consideration is to be given to increasing all classes of PRSI over time to replenish the Social Insurance Fund to help pay for the state pension, improved short-term sick pay benefits, parental leave benefits, pay-related jobseekers benefit and treatment benefits (medical, dental, optical, hearing).
There is a strong commitment to retaining the 12.5% Corporation Tax rate.
The implementation of the Roadmap on Corporation Tax Reform will continue. The Roadmap was published in September 2018 and sets out the steps required at EU level under Anti-Tax Avoidance Directives and OECD’s Base Erosion and Profit Shifting project. The key changes in the Roadmap include:
Small Business Taxes
A review of CGT is proposed in each Budget over the next 5 years with the objective of supporting driven enterprises that will help with the transition to a low-carbon economy.
The take up of R&D Tax Credit by small domestic companies will be encouraged.
Local Property Tax (LPT)
New legislation will be brought forward to make LPT fairer and to ensure that most homeowners will face no increase.
New homes, which are currently exempt, will be brought into the LPT charge.
The Carbon Tax will increase to €100 per ton by 2030. The increase is to be achieved by an annual increase of €7.50 per annum to 2029 and €6.50 in 2023.
Commission on Welfare and Taxation
A Commission on Welfare and Taxation is to be established to independently consider how best the tax system can support economic activity and promote increased employment and prosperity.
It is intended to increase remote, flexible and hub-working arrangements to support employees and enterprise. No detail is given on this.
Other Business Supports
National Development Plan (NDP)
The planned review of the NDP will be brought forward and an updated NDP will issue for the period to 2031.
While the Programme for Government is a long and wide-reaching document, it is light on detail.
However, the suggestion of increases in PRSI across the board is concerning. Also, Corporation Tax Reform will in some cases drive up taxation paid by corporates with restrictions on interest deductions and transfer pricing changes likely to be the main drivers.
The review of CGT in each of the next 5 Budgets will hopefully bring some reduction in the 33% rate, which is high by international standards.
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