Question

(a) Discuss the fiscal stance of Budget 2019 which was introduced by the Irish government in October 2018. In your view is the fiscal stance appropriate?

Answer 1

The fiscal stance of budget 2019 as introduced by the government of Ireland in october 2018 are-

• A strong reaffirmation to the 12.5% corporation tax rate
  • A 0.1% increase in employers’ share of pay related social insurance (PRSI) in 2019 and 2020 (increased to 10.95% and 11.05%, respectively)
  • Increases to limits on tax relief for certain share remuneration provided to key employees by certain small and medium size enterprises
  • Exit tax at a rate of 12.5% to apply from midnight 9 October 2018 for companies ceasing to be Irish tax residents
  • Film tax relief corporate tax credit regime extended to December 2024
  • Start-up relief from corporate tax extended until end of 2021
    
• Proposed tax measures affecting individual taxpayers, such as:
  • Increase in the standard band of income tax by €750 for a single earner
  • Marginal rate of tax on income up to €70,000 now 48.5%
  • Benefit in kind at 0% on electric cars extended to 2021 subject to a €50,000 cap in car value
  • The tax-free threshold for gifts and inheritances within Category A (generally parents to children) increases from €310,000 to 320,000, for gifts and inheritances from 10 October 2018
    
• The budget also proposes the following property tax and indirect tax measures:
  • Tax deductability on interest paid on loans used to acquire or repair rented property, increasing from 75% to 100% from 1 January 2019
  • The reduced 9% rate of value added tax (VAT) for certain activities within the tourism and hospitality sector to revert to 13.5% from 1 January 2019
  • The 9% VAT rate on the provision of facilities for taking part in sporting activities and for certain printed material (newspapers) to continue  
  • The standard VAT rate applying currently to certain on-line publications to be reduced to 9%
  • Excise duty on a packet of 20 cigarettes to increase by 50 cent (including VAT) from midnight tonight (9 October 2018), with a pro-rata increase on other tobacco products
  • Betting duty (bets entered into by bookmakers with persons in Ireland) to increase from 1% to 2% and the duty on commissions earned by betting exchanges and intermediaries utilised by persons in Ireland to increase from 15% to 25%, from 1 January 2019
  • Vehicle registration tax relief for hybrid vehicles extended until the end of 2019
  • Vehicle registration tax surcharge at a rate of 1% for diesel passenger vehicles registered from 1 January 2019 introduced

Now its the turn of giving a brief view on this fiscal stance of budget-

Government is operating against a backdrop of strong and increasingly balanced domestic economic growth, together with continued improvement in employment rates and record tax receipts. Government has increased expenditure across a range of sectors, including capital expenditure.It was unfortunate not to see the retention of the 9% VAT rate for tourism and hospitality sectors. On the corporate tax agenda, an exit tax rate of 12.5% on unrealised gains will apply from midnight 9 October 2018 on companies migrating residency from Ireland. Many companies would have been able to claim an exemption from tax prior to this change. This amendment to exit tax rules in Budget 2019 was unexpected.A clear strategy to reduce the personal tax burden on work/earned income remains a key priority for the future, and as such we welcome proposals to raise the standard rate income tax band.