The top five business budget measures are identified, including the reduction of corporation tax, while the five worst measures are also highlighted.
1. Cutting corporation tax to 12.5 percent 1997
In the late 1990s, companies paid tax of up to 32 percent on their profits. McCreevy announced plans in the December 1997 budget to reduce the rate down to 12.5 percent by 2003. Google, Facebook, Twitter would not be here without the super low tax rate. The economy was utterly transformed, with foreign direct investment becoming the key focus for job creation. The reduction of tax, couple with a young, smart english speaking population at the edge of the euro was the secret sauce for the boom of the early 2000s - before everything boiled over on property and credit.
The economy was utterly transformed, with foreign direct investment becoming the key focus for job creation. The reduction of tax, couple with a young, smart english speaking population at the edge of the euro was the secret sauce for the boom of the early 2000s - before everything boiled over on property and credit.
2. Film Tax Relief 1987
Ireland was at the forefront of using tax breaks to help attract movie production to Ireland, with the introduction of the section 35 tax relief in 1987. Big budget Hollywood productions like Braveheart, Saving Private Ryan and Reign of Fire were all made in Ireland to capitalise on the scheme, which saw production companies able to offset chunks of their budget against tax. The scheme - now called Section 481 - was also extended to television, which has seem shows such as the Tudors and The Vikings made in Ireland.
3. The creation of the national Pensions Reserve Fund 2001
Finance Minister Charlie McCreevy broke with tradition in 2001, when he decided to think further forward than the next election. McCreevy announced plans to create the National Pensions reserve Fund which would help pay for the looming public sector time bomb. some 1 percent of GNP each year was to be paid into the fund, which was to be invested to provide a sufficient cash pile to pay for the baby boomer pension needs of coming years. A forward thinking idea. The fund was subsequently raised to bail out the banks. The banks are a little bit less wrecked but there’s hardly anything left to pay for future pensions.
4. First Programme for Economic Expansion- 1958
The “First Programme for Economic Expansion” - a massive overhaul of the moribund economy put together by TK Whitaker, was fleshed out in James Ryan’s 1959 budget. It would see Ireland take a dramatic leap forward through the introduction of reliefs for foreign direct investments and the liberalisation of trade. It was an exceptional bold strategy but one that paid off spectacularly as the economy boomed.
5. Stallion nominations fees tax break 1969
Charlie Haughey introduced a tax break on stallion nomination fees in 1969 in a move that help catapult the Irish bloodstock industry onto the world stage. The move helped make fortunes for some shrewd breeders and led to the likes of John Magnier's Coolmore Stud becoming one of the leading global players in the industry. Politically it became a hot potato as many of Haughey’s inner circle initially benefited from the move, but as an incentive to boost business, it was hard to top.
The 5 worst business budget measures
1. The VAT hike of 2008
Sometimes tax hikes are just unmitigated disasters. In his emergency budget of October 2008, the then Finance Minister Brian Lenihan upped the rate of VAT from 21 percent to 21.5 percent. It was a small increase but when coupled with the British move to slash its VAT rate from 17.5 percent to 15 percent, it made Ireland extremely uncompetitive. Cross border shopping boomed with tailbacks indicating thousands of consumers were crossing the border to buy cheaper groceries. Lenihan later admitted that the move had been “a serious mistake” with estimates that consumers had spent over €700m in the north.
2. Decentralisation 2003
Charlie McCreevy could never be accused of not thinking outside the box. His 2003 budget speech blindsided many of his officials when he announced massive plans to decentralise the civil service and state bodies by sprinkling them around the country away from Dublin. The idea was that it would re-invigorate the regions and create employment away from Dublin. But it turned into a complete turkey as the public sector dragged its feet and the process bogged down. In 2011, the decentralisation programme was finally culled. Of 94 separate decentralisation projects, just 32 were implemented fully.
3. Individualisation 2000
The full impact of tax individualisation did not become apparent until some days after Charlie McCreevy's 2000 budget. the measure which saw working parents receive more favourable tax treatment than families with one parent staying at home, was designed to encourage more women to return to the labour force in a bid to stem some of the skills shortages experienced by companies. Instead it just caused hardship and the rise of a generation of latch key kids, who didn’t see their parents from dawn till dusk. The creche industry benefited hugely.
4. The semi abolition of property tax breaks in 2005
In december 2005, the then Finance Minister Brian Cowen stuck it to various tax breaks that were making the super rich even richer. Property tax breaks were targeted. Despite the fact that the market was clearly massively overheating, cowen decided to slowly phase out the tax breaks on new development by announcing that they would be closed off by the end of 2008. It was a real missed opportunity to apply the brakes to the out of control property market. A €63bn bank bail out, the Troika, austerity, mass emigration....all of these could have been tempered by an earlier intervention by the government into the property market.
5. John Bruton and VAT on children's shoes 1982
Former Fine Gael Finance minister John Bruton’s 1982 budget was voted down when he tried to introduce VAT on children’s shoes. It must have seen like an innocuous measure when he was framing the budget and juggling the finances in a bid to get the economy back on track. But like the proposed abolition of medical cards for the over 70s, it was the little things that trip up governments. The failure of the budget contributed to the political instability and economic stagnation that scarred the early 1980s.