Overview: The worst is over, Michael Noonan promises
Published 05/12/2012 | 14:44
Ireland is emerging from its economic crisis, Finance Minister Michael Noonan has declared in this opening remarks of the Budget 2013.
Giving details of his latest austerity Budget in the Dail, Mr Noonan said the economy was continuing to grow but still had a long way to go.
"There are manifest signs that the country is emerging from the worst of the crisis," he said.
The minister said his focus was now on helping small and medium-sized enterprises, which he described as the life-blood of the economy.
The basis of that will be a 10-point tax reform, which includes:
- Reforming the three-year corporation tax relief for start-up companies;
- Increasing the cash receipts threshold for VAT from €1m €1.25m;
- Amending the R&D tax credit and extending the foreign earnings deduction for work-related travel to certain countries.
The film industry also received a boost.
Mr Noonan announced that he would extend the section 481 tax relief for movie productions made in Ireland until 2020.
"(It will) enhance the scheme so as to make Ireland even more attractive for foreign film and TV productions," he said.
The section 481 will be reformed into a tax credit model to bring "better value for money and eliminate the need for high-income investors to provide the funding".
Mr Noonan said the reform would ensure the money saved goes to creating jobs rather than to investors.
In the tourism sector and with the Gathering initiative building momentum to create a boost in visitor numbers next year, Mr Noonan said the 9pc VAT rate for the sector would run until 2013.
Outlining details of the anticipated new property tax, he said new or previously unoccupied homes would be exempt from the levy up to the end of 2016.
First-time buyers of any homes next year will not have to pay the charge tax during that period.
"This exemption for three years from the local property tax will also apply to residences in unfinished estates," Mr Noonan said.
The minister said he would introduce real estate investment trusts to encourage private funding in the commercial property market and help regeneration of run-down areas.
"These property measures are also designed to create additional jobs in the property and construction sectors," he said.
On the state of the public finances, Mr Noonan said the general Government deficit for this year will be 8.2pc.
Estimated deficits for 2013/15 are 7.5pc, 5.1pc and 2.9pc respectively, which Mr Noonan said was "all in line with the targets we have to achieve".
Budget 2013 confirmed the previously-published forecasts for GDP economic growth, which includes the value of the multinational sector, of 1.5pc next year, rising to 2.5pc in 2014 and 2.9pc in 2015.
Mr Noonan said future Budgets for 2014 and 2015 would see corrections of €3.1 billion and €2 billion.
In an overhaul of pension tax breaks, tax relief on pension contributions will apply only to schemes that deliver income less than €60,000 a year from January 2014.
Tax relief on pension contributions will continue at the marginal rate of tax while the pension levy will not be renewed after the end of next year.
The reduced rate on the universal social charge for wealthy pensioners - over-70s with an income more than €60,000 - will be discontinued from the new year.
The Local Property Tax, which will start in July next year, will be by self-assessment under guidance by collectors, the Revenue Commissioners.
Alternatively, property owners can use a "competent" valuer, Mr Noonan told the Dail.
Initial valuations will be valid up to and including 2016, at a rate of 0.18pc of the market value on properties worth up to €1m.
More expensive houses will be subject to a 0.25pc levy.
"These central national rates will not be varied during the lifetime of this Government," said Mr Noonan.
Property owners will be able to choose from payment options including payment by direct debit, credit or debit cards, cash payments or "deduction at source" from salary or pensions.
There will be a voluntary deferral scheme for those in financial difficulties.
From 2015, local authorities will have the power to vary the rates by 15pc above or below the central national rates.
As part of the property tax changes, the household charge ends in the New Year, while the second homes charge will cease in 2014.
Carbon tax has been extended to solid fuels.
Mr Noonan said the reform - €10 a tonne increasing to €20 a tonne 12 months later - will hit on a phased basis over two years from next May.
Elsewhere, maternity benefit will be taxed from July 2013.
Mr Noonan said: "When I stood before the house last year on December 6, the Irish government was locked out of bond markets.
"Today, markets and foreign lenders are willing once more to lend to Ireland and to Irish businesses. This is essential for our businesses and our economy to continue its path to recovery."
He added: "We are now well on the road to recovery so let's look to the future with confidence."
In the second half of Budget 2013, Minister for Public Expenditure and Reform Brendan Howlin confirmed a raft of cuts in spending.
- Child benefit rates to be reduced by €10 a month.
- Household benefits to be cut with a €61m saving from the telephone allowance scheme and €20m from the electricity allowance.
- Jobseekers' benefit is to be reduced by three months.