Budget 2012: Help for negative equity homeowners
MORTGAGE interest relief is to be raised to 30pc to help people who bought houses between 2004 and 2008 Finance Minister Michael Noonan announced as he revealed Ireland’s fifth austerity budget since 2009.
A waiver on the €100 household charge will apply to those on mortgage interest supplement and for those living in unfinished housing estates, or so-called ghost estates.
In an attempt to add some optimism to the crippled property market, a new capital gains tax incentive has been drawn up.
The gains on any property purchased between midnight tonight and the end of 2013 and held for at least seven years will be exempt from the tax.
For first-time buyers who bought homes during the property boom, mortgage interest relief will be increased to 30pc.
The relief will be phased out after 2012, to be fully abolished by 2018.
For first-time buyers purchasing next year, a mortgage interest relief of 25pc will apply, while non-first-time buyers can benefit from a 15pc relief rate.
A property relief surcharge of 5pc will be imposed on investors with an annual gross income over €100,000.
The primary focus of the tax reforms to raise €1 billion is to create jobs, he pledged.
He promised again that there will be no change in Ireland’s 12.5pc Corporate Tax rate.
As predicted there were no increases in income tax.
Mr Noonan said that he will establish a Nama advisory group who will advise him on Nama strategy and make appointments to its board.
On the old reliables of drink and cigarettes, Mr Noonan said the duty on tobacco will increase by 25 cent from midnight.
Alcohol is not being hit but the 2pc VAT will apply.
As a result of people buying cleaner and cheaper cars, Mr Noonan said he was looking to overhaul VRT and motor tax next year because of dwindling tax revenues.
In the meantime, Environment Minister Phil Hogan is to outline a motor tax hike from the start of the New Year, aimed at raising €47 million.
Mr Noonan said a key plank of the Government's Budget 2012 was to avoid touching people's earnings and instead target indirect or discretionary taxes.
"The Programme for Government states that there will be no increase in income tax. This is the key issue for this Budget. I want to make clear that there will be no increase in income tax," he said.
"People's wages and salary in January will be the same as wages and salary in December."
As he unveiled the final tax reforms, including plans for a 2pc VAT hike to 23pc, Mr Noonan said the economy is expected to grow by 1.3pc next year.
The minister said the Fine Gael-Labour coalition Government was attempting to repair a decade of disastrous economic policy.
"The people of Ireland have paid a very high price for this mismanagement of the economy," the minister said.
"Personal wealth has been destroyed, thousands of people are sinking into poverty, emigration has returned and unemployment is far too high.
"The task of this Government is to regain control over Ireland's fiscal and economic policies, to grow the economy again and to get people back to work."
Mr Noonan said he was bringing in a range of measures to boost smaller firms including tax credits on the first €100,000 spent on research and development.
A corporation tax exemption for new start-ups has been extended for three years to 2014.
This would help kick start the domestic economy, which will be the the "real engine" for job creation, he said.
There would also be incentives outlined in the Finance Bill for the international financial services industry in Ireland.
Mr Noonan said there would also be significant reductions in the rate of stamp duty for the transfer of commercial property, including farms, to encourage the transfer of family agricultural businesses on to the next generation.
One of the most significant tax changes in Budget 2012 will be to ease the burden of the Universal Social Charge, applied to the earnings of virtually all workers.
The threshold at which the 4pc levy kicks in is to be raised from €4,004 to €10,036 from January 1.
The carbon tax will increase from €15 to €20 euro per tonne, hitting motor fuels, coal and home heating fuels.
Mr Noonan said he would also:
: Increase the current rate of capital acquisitions tax from 25pc to 30pc.
:: Increase capital gains tax from 25pc to 30pc.
:: Reduce the Group A tax-free threshold for capital acquisitions tax from €332,084 to €250,000.
:: Increase deposit interest retention tax from 27pc to 30pc.
The Minister opened his speech with reference to 1921 Treaty and Ireland gaining economic sovereignty.
He said the primary purpose of this Budget is to support the creation of jobs in the short term, the medium term and the long term.
He will introduce a Special Assignee Relief Programme, which will allow multinational and indigenous companies to attract key people to Ireland so as to create more jobs and to facilitate the development and expansion of businesses in Ireland.
“We want to get people back to work,” he said.