What is in the budget?
- A reduction in the rate of USC by 0.5% across the three USC bands.
- An adjustment in the entry point of the 5% rate to €18,772 in recognition of the 10c increase in the minimum wage.
- A time limited (2019) first time buyer tax rebate incentive of income tax paid over the previous four years up to 5% of the purchase price of up to €400,000. The house must be a new build and applicants must take out a mortgage of at least 80% of the purchase price.
- The introduction of a sugar tax in 2018 to coincide with the UK, following consultation.
- The excise duty on a packet of cigarettes is being increased by 50 cents (including VAT) with a pro-rata increase on the other tobacco products and no increase in excise on alcohol.
- Extensions to the foreign earnings deductions (FED), Special assignee relief (SARP) and start your own business relief schemes.
What does it mean for business?
Overall changes in personal taxation will be fairly minimal with cuts to the various USC rates being paid for by the non-indexation of the income tax system (i.e. not increasing the bands and credits in line with wage growth), which will drag more people into the top rate of tax. In inflation adjusted terms, the tax system will actually remain quite static.
On the consumption tax side the sugar tax is unlikely to achieve much in the way of its stated aims, even though consultation in its design is welcome. Increases to tobacco excise are unlikely to raise the planned revenues and indeed are more likely to result in exchequer losses as more trade moves outside the formal sector.