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Francis Moriarty & Carmel O’Brien PSC Taxation Services Budget 2012

Francis Moriarty & Carmel O’Brien PSC Taxation Services Budget 2012. New taxes in the last 4 years . Income levy Subsequently doubled Subsequently replaced by the Universal Social Charge Carbon Tax Non Principal Private Residence Charge (NPPR) Universal Social Charge Pension Levy

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Francis Moriarty & Carmel O’Brien PSC Taxation Services Budget 2012

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  1. Francis Moriarty & Carmel O’Brien PSC Taxation Services Budget 2012

  2. New taxes in the last 4 years • Income levy • Subsequently doubled • Subsequently replaced by the Universal Social Charge • Carbon Tax • Non Principal Private Residence Charge (NPPR) • Universal Social Charge • Pension Levy • Household Charge Plus • Dramatic increases in income tax (bands/credits, levies, etc).

  3. Budget 2012 Tax Revenue Since 2007

  4. Budget 2012 • Deficit of €16bn a year • €3.8bn adjustment in the Budget • Cut public spending by €2.2bn and raise €1.6bn in extra (indirect) taxes • Income Tax left untouched

  5. Budget 2012 Social Protection (€475m) • No reduction in weekly rates of SW payments • Cuts in child benefit for third (to €148) and subsequent (to €160) children • Rates of child benefit to be standardised over two years (€43m) • Reduction in fuel season from 32 to 26 weeks (€51m) • Changes to one-parent family payment (€20.7m) • Redundancy & Insolvency scheme – reduction in employer rebate from 60% to 15% (€81m) • Changes in rent supplement (€55m)

  6. Budget 2012 Department of Health (€543m) • Increase in monthly threshold from €120 to €132 under the Drug Payment Scheme (€12m) • Secure 2% “efficiencies” in disability, mental health and children’s services (€50m) • Reduce numbers and contain pay costs (€145m) • Reduce price of drugs and services (€112m) • Efficiencies in procurement (€50m) • Generation and collection of private income in public hospitals (€143m) – private health insurance + 50%?

  7. Budget 2012 Household Charge • €100 annual charge – likely to increase significantly • Applies to NPPR properties (€200 levy) • Can be paid in instalments (on-line and Post Offices) and waivers will apply • Ownership on 1 January • Temporary measure – comprehensive valuation system to be introduced following report on inter-departmental expert group • To advise by mid-2012 on the design, scope and implementation of the property tax

  8. Budget 2012 Multi-National Sector • “Promise to our friends” in the multinational sector on 12.5% rate • Special Assignee Relief Programme • Foreign Earnings Deduction for temporary assignments (60 days a year) to develop markets in BRICS countries • Package of measures in Finance Bill to support the international funds industry, the corporate treasury sector, the international insurance industry and the aircraft leasing industry

  9. Budget 2012 Indigenous Industry (R&D) • First €100,000 of qualifying R&D expenditure will benefit from the R&D credit on a volume basis • Continues to apply on an incremental basis for expenditure over €100,000 compared to base year of 2003 • Outsourcing limits: increased to greater of 5%/10% or €100,000 • Credit to reward R&D employees

  10. Budget 2012 Indigenous Industry • Corporate start-up exemption for new start-up companies being extended for next three years for companies commencing to trade in 2012, 2013 and 2014 • Employment Investment Incentive Scheme (effective from 25th November) – replaces BES Scheme

  11. Budget 2012 Pension Changes • ARFs: increase in imputed distribution from 5% to 6% in respect of ARFs valued in excess of €2m(31/12/2012) • Transfer on death of ARF assets to children over 21 to be subject to final liability of 30% (up from 20%) • Vested PRSA’s – similar provision as for ARFs on imputed distribution. • Employer PRSI relief on employee pension contributions – current relief is being removed

  12. Budget 2012 Legacy Property Reliefs • Economic Impact Assessment – “unworkable” and would have caused “significant and lasting damage”. Report to be published with Finance Bill 2012 • Decision not to proceed with measures as announced in Budget 2011 • Property relief surcharge of 5% imposed on investors with an annual gross income over €100,000. Applies to the amount of income sheltered by property reliefs in a given year • USC type approach

  13. Budget 2012 Legacy Property Reliefs (contd) • Reliefs will not be terminated or restricted for investors with an annual gross income under €100,000 (greatest risk of insolvency) • Investors in Accelerated Capital Allowance scheme no longer able to use allowances beyond the tax life where the tax life ends after 1 January 2015 • No carry forward of allowances where the tax life has ended before 1 January 2015 • Delay to give investors time to adjust

  14. Budget 2012 Property Transactions • Reduction in stamp duty rate for non residential property transfers reduced from top rate of 6% to 2% • Consanguinity relief is still available until 31 December 2014 (effective rate of 1%) • Effective from midnight on 6 December 2011 • Existing residential rates of 1% on transactions up to €1m and 2% thereafter continue to apply • CGT incentive for property purchased between midnight 6 December and end of 2013. If a property is bought during this period and held for seven years, gain attributable to this period is exempt

  15. Budget 2012 Mortgage Interest Relief • Increase in rate of mortgage interest relief to 30% for first time buyers (property acquired between 2004 and 2008) • Purchasers in 2012: • FTB to get relief at 25% rather than 15% as previously proposed • Non-FTB will benefit from relief at 15% instead of reduced rate of 10% previously proposed • No longer available to house purchasers after 2012 and fully abolished from 2018

  16. Budget 2012 Income Tax • Removal of tax exemption for the first 36 days of illness benefit and occupational injury benefit • DIRT rate increased to 30%

  17. Budget 2012 Farmer Taxation • Enhanced 50% stock relief for registered farm partnerships (100% for young trained farmers) – subject to EU approval – until 31 December 2015 • Reduction in stamp duty to 2% - non- residential properties • Extension of VAT refunds procedures for wind turbines

  18. Budget 2012 Farmer/Business Taxation: Retirement Relief • Present relief for transfers to close relatives will continue to apply for individuals aged 55 to 66 • Upper limit of €3m for business and farming assets disposed of within the family where the individuals is aged over 66 • Upper limit of €750k for disposals outside the family reduced to €500k where the individual is aged over 66 • Current limits apply for a transitional period of two years for individuals currently aged 66 or who reach that age before 31 December 2013

  19. Budget 2012 Universal Social Charge • Increase of lower exemption threshold from €4,004 to €10,036 • 1 January 2012 • To benefit nearly 330,00 people • Move USC to a cumulative system from 2012

  20. Budget 2012 Excise Duties • Tobacco products (25 cent per pack of 20) • Carbon Tax (increase from €5 to €20 per tonne on fossil fuels) Petrol 1.4c/litre : Diesel 1.6c/litre • Betting Duty – New Bill dealing with on-line betting etc • VRT – adjust bands w.e.f. 1 January 2013 • Motor Tax – increase across all categories with effect from 1 January 2012

  21. Budget 2012 PRSI Broadening the Base: • Removal of the remaining 50% employer PRSI relief on employee pensions • For employees, extending to cover rental, investment and other forms of passive income from 2013

  22. Budget 2012 The Current VAT picture • About €10.2bn in VAT to be collected in 2011 • Almost 30% of the total tax yield • 2nd biggest tax after income tax • 6 different VAT rates (0%, 4.8%,5.2%,9%,13.5%,21%) • Apart from two brief periods, our standard VAT rate has been 21% for 20 years

  23. Budget 2012 VAT in Budget 2012 • Increase in standard rate from 21% to 23% confirmed • Will take us to: • Highestrate in Eurozone (along with Finland, Greece and Portugal) • Fourth highest rate in the EU • Expected to yield additional €670m per annum • Effective from 1 January 2012 • VAT rate on district heating reduced from 21% to 13.5% • Admissions to open farms to apply at the 9% reduced rate • Guidance notes on changeover available from PSC

  24. Budget 2012 23% rate will apply to about half of all goods and services

  25. Budget 2012 VAT on Food & Drink – some examples

  26. Budget 2012 CAT Changes • Capital acquisitions tax (CAT) rate increased: • From 25% to 30% • CAT Group A Threshold reduced from €332,084 to €250,000 for benefits received after 6 December 2011 • No mention of Agricultural Relief or Business Property Relief (indirect impact of CGT changes?)

  27. Budget 2012 CGT Changes • Capital gains tax (CGT) rate increased: • From 25% to 30% • Restrictions on retirement relief for within family (€3m) and outside family (reduced from €750k to €500k) • Exemption from CGT on sale of properties acquired in the period 7/12/2011 to 31/12/2013, if held for more than 7 years

  28. Budget 2012 Non Tax Measures • NAMA Rent Reviews • Mortgage arrears – implementation of Group’s recommendations • Banking Sector – SME lending targets • Tourism

  29. PSC Taxation Services Francis Moriarty 066 7126333 fmoriarty@psc.ie Carmel O’Brien 066 7126333 cobrien@psc.ie

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