From truckers and brewers to builders and the tax payer - the winners and losers from Budget 2016
AS THE dust settles on Budget Day, it's clear that some sectors did far better than others. Sunday Independent Business editor Nick Webb examines the winners and losers.
First, the winners:
Retailers: Consumer spending will be boosted by the cut in the USC, which will put up to €1,000 in taxpayer’s pockets. This will bolster confidence which will in turn see further increases in spending. This will be the best Christmas retailers have had since 2007. More money sloshing around the economy means that more jobs will be created. Shops, pubs, restaurants, hotels and other discretionary spending sectors are rubbing their hands together with glee. Expect prices to rise too. Cuts to card payment fees are smart and reduce business cost and will help boost e-payments.
Entrepreneurs: Business owners will have to give less of their success back to the state as taxes on profits made from the sale of their companies has been cut from 33pc to 20pc. This is capped at the first €1m. Smart entrepreneurs will already have reduced this potential exposure through aggressive tax planning but it will benefit those without teams of highly paid tax planners at their disposal.
Big pharma and tech: Many of the big multinational carry out precious little R&D in Ireland. Most of the really clever engineers and innovators are in Silicon Valley rather than Silicon Docks. A complex new “knowledge box” tax break will reduce corporation tax for those companies doing R&D in Ireland. It’ll be the first scheme to get the blue tick from the OECD as it seeks to regularise global tax breaks. However other countries have several years to get their own tax schemes in order so this may not have an immediate impact. Reductions in income taxes and supports to bring highly skilled workers back to Ireland will help fill the skills gap. Slightly.
Nama: It’s getting harder and harder to kill off this vast state agency. Initially designed as the dumping ground for toxic property loans from the banks, Nama is evolving into a property development company. Nama will be tasked with helping deliver 20,000 new homes by 2020, so there’s less chance of it being wound up earlier than that. The last time the State tried its hand at property development, things ended badly. The Docklands Development Authority turned into a giant black hole for the tax payer.
Truckers, white van owners, film makers, hoteliers and brewers: It’s been quite a lobbying campaign by hauliers, van owners and craft brewers, who have managed to secure their very own tax breaks. It could be worth as much as €4,000 apiece to commercial vehicle owners. This will make business more competitive as logistics costs shrink. Plenty more cash for Yorkies! Craft brewers also get their tax breaks upfront to help cash flow. The Film and TV industry also got an increase on the cap on their budget that was subject to tax credits, which may nudge them towards building new studios. Hoteliers and the hospitality sector retained the 9pc VAT rate. However price gouging in Dublin means that the low rate will come under real scrutiny next year – perhaps with a special rate for Dublin and a lower one for elsewhere.
And now for those who didn't fare quite so well:
Entrepreneurs: There’s still no safety net for those risk takers seeking to set up in business. Lose your job if you’re an employee and the state will look after you. Fail at business and you’re on your own. The initial tax break of €550 for the self-employed and farmers is puny compared to the supports for PAYE workers. Noonan offered the carrot to tax equalisation for the self employed if the government gets re-elected.
Banks: The bank levy which generates €150m per year will be extended to 2021, which will bring in €750m – the equivalent to the cost of the national Children’s Hospital. A politically palatable move that will play well with bank bashers. What they don’t realise is that banks will shrug their shoulders and pass the cost straight on to their customers. Watch as your loan rate gets tweaked upward or your savings rate slips down. There’ll also be an increase in the number of sneaky fees.
Builders: There has been a “market failure” when it comes to delivering new houses in Dublin. The state is intervening in the form of Nama. The poisoned loan agency will work with its client developers to build new homes. Developers who have exited Nama after paying their dues or new entrants who never needed to be bailed out are now facing heavily subsidised competition. They will be at a serious disadvantage. The new houses will be delivered “through existing debtor platforms where possible”.
The tax payer: Taking another 42,500 low paid people out of the tax net and a total of 700,000 out of the reach of USC is good for them ….but it also means that there are less people to carry the tax burden. During the financial crisis the sudden spike in unemployment meant that the numbers paying tax shrank even further leading to the huge fiscal deficit. Cutting the tax base makes the economy less capable of ignoring financial shocks. What happens if the commodity crash causes a global debt crisis? Or China implodes. This is election short termism.
Drinks Industry: Apart from the hipsters running the craft beer sector, the drinks industry – publicans and major brewers and importers – got no relief. Super high excise duties on booze weren’t touched, which means that Ireland remains one of the most expensive places in the Western world to buy a bottle of Montepulciano.