The Minister for Finance and the Minister for Public Expenditure and Reform presented Budget 2017 against what is arguably the most favourable economic and fiscal backdrop in a number of years.
Notwithstanding this fact, it is also true to say that the budget was presented against a background of intense uncertainty and challenge. Brexit, ongoing sterling weakness, the recent Apple tax ruling, growing unrest amongst some trade unions, and the unstable nature of the Dail and the government, are all issues of significant concern that should have a major bearing on the nature of Budget 2017 and indeed fiscal policy for the coming years.
Budget 2017 is the 6th budget presented by Michael Noonan. The total package in the Budget is estimated at €1.3 billion. The tax component in 2017 comprises of €195 million in tax increases and €504 million in tax cuts, giving a net tax package of just €309 million. The remainder of the budgetary package is comprised of increases of roughly €1 billion in additional public expenditure above the amounts pre-committed in line with the Mid-Year Expenditure Review. In 2017, the Gross Current Expenditure Ceiling will increase by €1.5 billion and the Gross Capital Expenditure Ceiling will increase by €368 million.
The key measures announced in Budget 2017 include:
- The 9% VAT rate for the hospitality sector was retained;
- The Start your Own Business Scheme has been extended for a further 2 years;
- The CGT rate for chargeable gains on the disposal of qualifying assets has been cut from 20% to 10% up to a limit of €1 million;
- The 3 lowest rates of USC have been cut by 0.5% and the ceiling of €18,668 for payment of the 2.5% USC rate has been increased to €18,772 to ensure that workers earning the minimum wage will not pay the top rate of USC;
- The Home Carer Tax Credit has been increased from €1,000 to €1,100;
- The Earned Income Credit for self-employed people has been lifted from €550 to €950. This is a positive move, but still leaves the self-employed at a significant disadvantage to employees;
- The deduction available for qualifying interest payments on monies borrowed to purchase, improve or repair rental properties has been increased from 75% to 80% for next and existing mortgages. It will be increased in installments of 5% over the coming years until 100% is restored;
- The DIRT rate will be reduced by 2% per year for the next 4 years, taking the rate down to 33%;
- No changes to private pension provision, but the state pension and all weekly social welfare payments will increase by €5 per week;
- 2,400 extra teachers and 800 extra Gardai will be hired in 2017;
- A 5% rebate on income taxes paid by first-time buyers of a newly built home, capped at €20,000. Houses costing in excess of €600,000 will not be subject to the rebate;
- The rent a room earnings ceiling has been lifted from €12,000 to €14,000;
- CAT Group A lifetime tax-free threshold applying to gifts and inheritances from parents to children has been lifted from €280,000 to €310,000. Group B threshold has been lifted from €30,150 to €32,500; and Group C has been lifted from €15,075 to €16,250; and
- A packet of 20 cigarettes has been increased by 50 cent.
The views and opinions expressed in this article are those of the author.