budget Archives - Kelly Rahill Accountants

Fuel prices rise as Dáil passes Budget 2020 carbon tax increase

Fuel prices rise as Dáil passes Budget 2020 carbon tax increase

Some key taxation elements of Budget 2020 were passed by the Dáil last night, including the controversial increase in the carbon tax.

The number of deputies who voted in favour of the measure was 97, with only 36 opposing the increase and two TDs abstaining.

Accordingly, both petrol and diesel increased by 2 cent a litre at midnight.

The move was part of a Government plan to increase the price of carbon from €20 to €80 a tonne by 2030.

Taoiseach Leo Varadkar defended the increase in the carbon tax, saying it was about protecting the most vulnerable and addressing climate action.

“What we have done today is really significant,” he told RTÉ News last night.

The increase will come into effect for other fuels from May next year after the winter heating season.

Minister for Finance Paschal Donohoe said the funds raised would be ring-fenced to fund new climate action measures.

However, there was criticism of the move from members of the Opposition.

People Before Profit TD Richard Boyd Barrett said the €6 increase in the tax was regressive and punitive.

He said it would increase fuel bills for those who are struggling.

However, Green Party leader Eamon Ryan said it did not go far enough, saying it was a status quo Budget from a status quo Government.

He said it did very little when it comes to tackling climate change.

Sinn Féin’s Finance spokesperson Pearse Doherty said the Budget should have done more to give workers and families a break.

Labour leader Brendan Howlin said the poorest cohort of people would be worse off as a result of Budget 2020.

Other measures that were passed included increasing the price of 20 cigarettes by 50 cent, hiking the bank levy and also increasing stamp duty on the sale of non-residential property by 1.5%.

There were also measures passed to counter tax avoidance by large real estate funds.

Social Democrats co-leader Roisin Shortall said her party fully recognises the huge challenges facing the country in respect of Brexit, but the threat should not be used as some kind of cover for the Government in not addressing domestic issues in the Budget.

Speaking on RTÉ’s Morning Ireland, she said there were a number of challenges such as the housing crisis and serious problems within the health service and what was seen yesterday was an attempt to ignore these issues or address them adequately.

The Chief Executive of Irish Rural Link said rural communities are disappointed with the increase in carbon tax.

Séamus Boland said people will “take it on the chin” but the tax, which is designed to change behaviour, probably will not have the required effect because most people cannot afford to change.

Mr Boland added that the cost is even greater for households dependent on home heating oil and called for retrofitting to be made available “across the board” to low income households.

Further statements on the Budget will be heard in the Dáil shortly after midday, while Minister Donohoe will be on RTÉ’s Today with Sean O’Rourke from 10am.

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Ireland was a net contributor to the EU budget in 2018

Ireland was a net contributor to the EU budget in 2018

Ireland was a net contributor to the European Union budget to the tune of €315m in 2018, according to the latest report by the EU’s financial watchdog.

The sum represents an increase from €173m in 2017 and €181m in 2016.

However, officials expect Ireland’s budget contributions to rise further in the event of a no-deal Brexit, if member states insist on meeting the EU’s current spending ambitions.

The 2018 annual report by the European Court of Auditors shows that Ireland received €2.6bn in EU funding, with the vast majority coming in the form of farm subsidies.

Of €1.56bn in overall agriculture receipts, some €1.22bn was received by way of direct payments, and €319m in rural development funds.

Overall, the report says EU spending in 2018 amounted to €1.56bn. This represents 2.2% of the total government spending of EU member states and 1% of EU gross national income (GNI).

The annual audit says the estimated error rate in member states receiving and disbursing funds was 2.6%, compared to 2.4% in 2017 and 3.1% in 2016.

Officials from the Court of Auditors say they cannot estimate the impact of a no-deal Brexit on the EU’s accounts, since they can only audit after such an event has occurred.

Estimates vary as to the hole in the EU’s budget if the UK leaves without a deal and declines to pay its outstanding liabilities incurred during membership.

In a post for the Brussels-based think tank Bruegel, economist Zolt Darvas estimated that, had the UK left without a deal at the end of March, the total Brexit hole in the budget until 31 December 2020 would have amounted to about €16.5bn, or 0.066% of the EU27 GNI.

Under the Withdrawal Agreement, the UK would have been expected to pay around £39bn STG to meet its current and future liabilities.

However, the longer the UK stays in the EU, the higher those liabilities will become.

In April, the EU adopted emergency measures that would allow the UK beneficiaries to still receive EU funding for research and agriculture in the event of a no-deal Brexit.

This would be for contracts already signed and decisions made before the Brexit date, so long as the UK continued paying its contribution agreed in the EU budget for 2019.

Officials from the Court of Auditors believe that all member states, including Ireland, would have to pay more if the UK does not honour its liabilities in a no-deal scenario.

In a note to the Finnish presidency of the EU, reported by Politico, the German government said it would seek an increase in EU spending of no more than 1% of GNI over the seven year period.

“Losing the UK as one of the largest net contributors to the MFF (Multi-annual Financial Framework) means that even with this limit, contributions of the remaining Member States will increase significantly,” the note said.

However, officials from the Court of Auditors point out that member states have also demanded that the EU increases spending in the areas of security and migration.

The MFF, which is the EU’s seven year budget cycle, sets out spending plans and commitments from 2021-2027.

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Donohoe says absolutely no surprises in Budget 2020

Donohoe says absolutely no surprises in Budget 2020

The Minister for Finance has said there will be “absolutely no surprises” in the Budget to be outlined this afternoon.

Speaking as he arrived at the Department of Finance this morning, Paschal Donohoe said all of the main features of Budget 2020 are well known.

He said this was “a particularly challenging budget” because of the need to make some changes before Brexit.

Minister Donohoe also said the expenditure measures that will be announced are broadly in line with what he had expected.

A range of measures aimed at helping the sectors most at risk from a hard Brexit will be included in Budget 2020.

Other measures are expected to include spending increases in healthcare and social welfare, as well as an increase in the carbon tax.

The Budget had been expected to be a package worth €2.8bn, but it is understood that the increase in carbon tax and changes to other taxes, such as the dividend withholding tax, could push it closer to €3bn.

Minister Donohoe concluded his discussions last night with a Fianna Fáil delegation, following talks with the Independent Alliance on its key concerns.

It is understood that some of both parties’ key budgetary demands were met.

An expansion in the medical card scheme for the over 70s and other health and social welfare spending increases are expected.

However, changes in personal taxation beyond adjustments for increases in the minimum wage are unlikely.

In a new development, the Government will also produce a citizen’s guide to the Budget for the first time.

Mr Donohoe is expected to outline details of a contingency fund of €650m that it will have on standby to help prop up sections of the economy most exposed in a crash-out Brexit scenario.

It will also spell out the timelines within which such funding will be made available.

It is understood that Minister for Business Heather Humphreys has secured agreement for a number of schemes and initiatives designed to support vulnerable but viable firms at particular risk from the UK exiting the EU without an agreement.

These would be activated on day one of a no-deal Brexit and the money behind them would become available to qualifying companies immediately.

The schemes include, for example, a new €45m Transition Fund that would be used to support businesses in the manufacturing and internationally traded services sector that need to adapt their business model and adjust their trading arrangements.

It will see supports of between €200,000 and €1m being made available to small or medium-sized firms with ten or more employees.

The funding will be offered either through a grant, loan or equity investment, depending on which is most appropriate.

It is also expected that a range of others schemes will be offered to further vulnerable sectors by other departments in the event of a no-deal Brexit, including in the areas of agriculture and tourism.

The Department of Social Protection looks set to receive additional funding to help with an expected increase in the numbers unemployed in such a scenario.

If there is a hard Brexit, the Exchequer is expected to move into a deficit of between 0.5% and 1.5% of GDP next year.

Some of this will be accounted for by spending on these Brexit mitigation measures. However, the contingency fund will only be used if there is a hard Brexit.

Additional financial assistance is also expected from the European Commission. Yesterday, Ibec said €1.5bn would be required over three years to assist companies most at risk from Brexit.

The discussions on Budget 2020 concluded just before 9pm last night, after more than an hour of talks between Minister Donohoe and a senior Fianna Fáil delegation, led by its finance spokesman Michael McGrath.

RTÉ News understands that some of Fianna Fáil’s key budgetary demands were met, including the recruitment of hundreds of additional gardaí.

It is believed Fianna Fáil has secured one million additional home support hours, at a cost of €45m, and a €25m boost in the budget for the National Treatment Purchase Fund.

One other concern, an increase in staff focused on special needs education, was also signed-off.

Earlier, representatives from the Independence Alliance held talks with the minister and it was agreed that thousands of additional people over 70 would become eligible for a medical card by increasing thresholds.

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Consumer sentiment falls to 6 year low on Brexit fears

Consumer sentiment falls to 6 year low on Brexit fears

Consumer sentiment here fell to a six-year low last month, the third month in a row in which it has fallen.

According to the KBC Bank Ireland Consumer Sentiment Index, Brexit uncertainty continues to drive people’s confidence in the economy and their personal finances lower.

“While the drop in confidence in September was notably smaller than in either of the two previous months, it was still sufficient to push the sentiment reading to its lowest level in nearly six years,” said KBC Ireland’s chief economist Austin Hughes.

“The last time the KBC sentiment index was lower than at present was in November 2013 when the index stood at 71,” he added.

September was also the first time since February 2017 that the survey of a representative sample of 1,000 adults found more consumers felt their household financial circumstances had worsened rather than improved over the last year.

The fall in confidence here contrasts with small improvements seen elsewhere in the globe, including the US, the Euro area as a whole and in the UK, with the differences attributable to two factors according to Mr Hughes.

“First of all, in terms of the factors influencing confidence among Irish consumers at present, it seems that Brexit concerns are not the main issue, they are the only issue,” he said.

“In the same vein, unlike their counterparts in other countries where the mood of consumers is being buffeted by uncertainty, Irish consumers appear now to be almost exclusively on downside risks.”

Consumer thinking here may also reflect scarring from the painful experience of the previous downturn, he added.

The data comes a day before the announcement of Budget 2020, where people traditionally expect some sort of measures to be unveiled that will give their finances a lift.

Three out of four of those questioned in the survey said any change to tax and welfare in the Budget would be important to their personal financial circumstances.

Nearly half of people looking to buy a home said their purchase prospects would worsen if the ‘help to buy’ scheme was ended.

One third of those suggested they would be prevented from buying in such a scenario.

There is a growing expectation that the Government will announce an extension to the scheme in tomorrow’s budget.

Mr Hughes said consumers will likely look for signs from the Budget that the economy and the public finances will not be devastated in the way they were eleven years ago.

He also suggested that consumer sentiment here, along with the economy, could be approaching a pivot point as Brexit negotiations approach decision time.

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Economy on course for over €600m surplus

Economy on course for over €600m surplus

The Government’s pre-Budget White Paper shows the economy is on course to deliver a surplus this year of €609 million.

The White Paper also shows another significant overrun on corporate tax receipts, which are €800m higher than forecast at the start of the year.

The White Paper is part of the architecture of the annual Budgetary process.

It sets out where the public finances would be at the end of the year, if the Minister for Finance Paschal Donohoe did nothing on Budget Day.

So far, the economy is performing stronger than forecast delivering a surplus of €609m this year compared to a broadly break even situation predicted at Budget time last year.

Evidence of this boost can be seen in corporate tax receipts rolling in €800m more than forecast, however, Government spending has also risen more than forecast.

It is running over €400m ahead with supplementary or extra funds required for Health, Justice and Education.

The White Paper also notes that the Irish contribution to the EU Budget is set to increase next year by a billion euro to €3.475bn.

Meanwhile, the returns from customs revenue is expected to almost quadruple from €366mto €1,241m, another indicator of the calculations behind a hard Brexit with potentially a hard border.

Speaking ahead of the publication of the White Paper, Minister Donohoe, said that a planned deposit of €500m into the ‘Rainy Day Fund’ will not be made this year as the Government is expected to have to borrow next year to deal with a possible no-dealBrexit.

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Blanket social welfare increase in Budget ruled out

Blanket social welfare increase in Budget ruled out

Discussions are continuing between Government departments throughout the weekend ahead of Tuesday’s Budget.

There is a particular focus on the Department of Social Protection, where an across the board increase in social welfare payments has been ruled out.

Instead any rise in payments is set to be confined to areas that would help children at risk of poverty and vulnerable elderly people.

This could mean increases in the Living Alone Allowance and the Qualified Child payment.

More home help hours for the elderly is another area that is being closely examined.

The extra revenue available for new Social Protection measures is understood to be around €150 million, which is well down on previous years.

There is also a limited amount of money for tax cuts. However, an increase in the tax credit for the self-employed is expected to be announced on Tuesday.

The Taoiseach has said there will be modest, targeted welfare increases in the Budget.

Leo Varadkar said this Budget has to be different because of Brexit, adding that the country cannot afford tax and welfare packages on the scale of the last three years.

Talks between the Minister for Finance, Paschal Donohoe, and Fianna Fáil are zoning in on ways of delivering more school places and services for children with special needs.

Ahead of the Independent Alliance’s meeting with Mr Donohoe tomorrow, a source close to Minister Finian McGrath said insufficient progress had been made around funding for the planned cystic fibrosis unit at Beaumont Hospital.

The Minister is seeking to have €350,000 released for work to progress on the design of the unit.

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Govt should consider supplementary Budget to respond to Brexit – ESRI

Govt should consider supplementary Budget to respond to Brexit – ESRI

The Economic and Social Research Institute has said the Government should consider a supplementary Budget in the New Year to respond to Brexit.

Next month’s Budget will be drawn up on a “disorderly Brexit” scenario.

In its latest Quarterly Economic Commentary, the think-tank warns that a no-deal Brexit may be worse than thought. It could push the economy into recession.

Also, if Brexit does not happen, it could prompt a rebound from consumers and investors, adding fuel to an economy already bursting at the seams in some areas.

For both scenarios, the ESRI is advising that the Government treats October’s Budget as a “draft” and revisits it in the New Year depending on what transpires over the next few months.

Minister for Finance Paschal Donohoe has said certain sectors exposed to Brexit will get targeted support.

In a report to be published later, the Dáil Committee on Budgetary Oversight will call for clarity on what these supports will be and how much they will cost.

The committee will also formally ask Mr Donohoe to clarify if the Rainy Day Fund can be used in the case of a hard Brexit.

The ESRI forecasts that the economy (GDP) will grow by 3.1% next year, which is down slightly on its forecast three months ago.

It notes indicators like consumer sentiment – at its lowest level since 2014 – and business confidence are down. Growth in retail sales has slowed.

This, the ESRI claims, is evidence of the impact Brexit is already having on the economy.

It has revised downwards its forecast for new house completions in 2019 from 23,500 units to 21,500 units.

It also blames this partly on Brexit but also on prices in some parts of the country reaching the limits of affordability.

However, it says it would be a “…serious mistake…” if Central Bank rules on lending were relaxed.

If this were to happen, the ESRI believes it “…would ultimately result in higher house prices along with higher levels of personal and household debt…”

It quotes a European Commission study which shows, when adjusted for size, house prices in Ireland are among the highest in the European Union.

The ESRI has repeated calls for the vacant sites tax to be increased to remove the factor of speculation from the price of land and make the construction of new homes cheaper.

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Small firms need UK-style tax breaks to ‘fight back’, compete post-Brexit – Dublin Chamber

Small firms need UK-style tax breaks to ‘fight back’, compete post-Brexit – Dublin Chamber

BUDGET 2020 must help small, indigenous companies to compete with a “more attractive” UK, chambers of commerce leaders told an Oireachtas committee yesterday.

Dublin Chamber chief executive Mary Rose Burke, whose organisation represents more than 1,300 businesses, said capital gains tax rules punished risk-taking by startups. She told the Budgetary Oversight Committee that the current blanket 33pc rate should be reduced to 20pc “for all unlisted trading firms”, noting that the UK already had a similar policy.

“We need to foster an entrepreneurial environment and strengthen Ireland’s indigenous business base,” she said, referring to the State’s headline corporate tax rate used to woo multinational investment.

Ms Burke said Ireland’s 33pc tax on capital gains “applies irrespective of the level of risk taken by an entrepreneur and the contribution of the investment to the Irish economy”. She added: “The same tax is paid on passive investments in large blue-chip multinationals as is paid on high-risk Irish startups. This effectively incentivises investment in larger foreign firms over investment in Irish small and medium-sized enterprises (SMEs).”

Dublin Chamber said the UK tax policy was well ahead of Ireland’s in helping startups and SMEs – and could gain further competitive advantages post-Brexit.

“They’re already more attractive than us for entrepreneurs. So whether they stay or leave (the EU), we need to look to improve our competitiveness in ways that are under our control,” Ms Burke said.

“Irish entrepreneurs have had to look on enviously over the past decade as the UK has rolled out the red carpet for burgeoning business, with consistent tweaks and improvements to their tax regime. Ireland has been too slow to react, resulting in our nearest neighbour – and biggest competitor – being allowed to steal a march,” she said. “With Brexit on the horizon, it is vital that we react and fight back.”

Her Dublin Chamber board colleague, KPMG tax partner Eoghan Quigley, said he was confident that capital gains incentives for small businesses would boost employment and retail sales, and “yield more tax than they cost us”.

Mr Quigley said the UK would gain policy freedom post-Brexit to offer even more competitive tax incentives.

“They will be free of a lot of the state aid restrictions that we have here,” he said, arguing for Irish tax policy on small businesses to “mark” UK standards closely.

Chambers Ireland, the umbrella group for chambers of commerce across Ireland, told the committee that Brexit would not only harm the agri-food and tourism industries, but was likely “to have a broader impact, potentially depressing consumer spending in regional areas significantly”.

Chambers Ireland CEO Ian Talbot called for the Government to provide detailed long-term plans on the rollout of carbon taxes and green energy incentives.

“We believe there should be a schedule for such increases, which will have the double effect of not only helping business to plan for them, but will also bring greater predictability to the present value of energy efficiency measures, thereby encouraging viable investment,” Mr Talbot said.

Finance Minister Paschal Donohoe is due to present Budget 2020 on October 8.

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IFAC urges Budget caution over Brexit, global risks

IFAC urges Budget caution over Brexit, global risks

The Irish Fiscal Advisory Council has urged the Government not to rely on surges in corporation tax to cover spending overruns.

In its pre-Budget statement, the economic watchdog has said the Government should be cautious because of the risks associated with Brexit and a “worsening outlook” in the rest of the world.

IFAC said Ireland’s underlying budgetary position has deteriorated since 2015.

It argued that the benefit of record corporation tax receipts and lower interest rates have been undermined by increased spending, particularly unplanned spending in areas such as health.

The council said using bumper corporation taxes to balance the books “carries significant risks”, as they are likely to prove temporary and the spending measures likely to last longer.

It said there was a case for the Government to more cautious as the risks around Brexit increase and the outlook in the rest of the world gets worse.

The council also said the Government needed to deliver on a more credible medium term plan for the public finances.

One of its ideas is to develop a so-called prudence account to save excess corporation tax receipts.

The IFAC is an independent body set up under statute to assess and comment on government fiscal policy.

IFAC Chairperson Seamus Coffey, speaking to RTÉ’s Morning Ireland, said that budgetary planning on the basis of a hard Brexit is the “most appropriate course of action”.

He said that a no-deal scenario does appear the most likely and planning for this scenario makes the most sense.

Brexit, Mr Coffey said, should not have an impact on the overall package that the Government chooses to deliver.

He explained the Government has set out a plan for budgetary measures totalling €2.8bn and the IFAC believes the Government must stick to and deliver this plan.

He added that the Government’s existing commitments total around €2.2bn, leaving €600m for discretionary measures.

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Help-to-Buy may cut higher value homes in Budget overhaul

Help-to-Buy may cut higher value homes in Budget overhaul

The Help-to-Buy scheme could return in October’s Budget but in a heavily capped form that would essentially exclude Dublin homes, the Sunday Independent has learned.

Finance Minister Paschal Donohoe plunged the future of the scheme into uncertainty when he refused to confirm that it would continue into next year.

The scheme provides a tax rebate of up to 5pc on the cost of a newly built property, up to a limit of €20,000. Currently, first-time buyers can claim the rebate on new homes worth as much as €600,000.

It is understood that the Minister is considering reducing the cap to as low as €250,000.

To date, the scheme has cost the State €196.2m over a 28-month period. In its first year, the scheme cost €85.1m.

Reducing the maximum value of suitable homes to €400,000 would cost the Exchequer €60m a year, a €25m annual saving, according to estimates from the Revenue Commissioners.

Such a reduction would essentially exclude new homes built in many parts of Dublin.

The average price paid for a new home in the Dublin City Council area last year was €525,901. In Dún Laoghaire-Rathdown, that figure rose to €648,512.

Should the scheme be limited to homes worth €300,000 or €250,000, it would have an annual cost to the Exchequer of €25m and €10m, respectively.

Either of those would ensure that no newly built properties in the Dublin area would qualify for the tax rebate scheme.

Construction Industry Federation (CIF) director general Tom Parlon said that the impact of the scheme being scrapped would be “nuclear”.

“We don’t have a problem if it was capped and certainly it could come down to €400,000 without having a major impact,” he said.

“It is going to exclude a certain cohort in Dublin and probably Dublin south, but even politically if it came down to €390,000, we could live with it.”

However, Parlon said having the scheme available for properties below €390,000 was “essential”.

The CIF chief said there had been a “slowdown” in the construction sector due to uncertainty around the scheme, Brexit, and difficulties in buyers securing mortgages.

“There was a time when you would have to put your name down in any development in Dublin; now you can walk into any one of them across the county and there are houses there to be bought,” he said.

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