Budget 2012

It could be said that Budget 2012 was not quite as expected and there were even a few surprises!

As announced prior to the budget there was no increase to income tax.

DIRT has increased to 30% where the minister stated that there is no need for the government to incentivise people to save!

While the rates of Capital Gains Tax and Capital Acquisitions taxes have both increased by 5% to 30%, the minister has announced only one change to Capital Gains Tax reliefs and this relates to retirement relief thresholds.

A new incentive for Capital Gains Tax has been introduced whereby gains accruing on properties purchased from budget night to the end of 2013 will not attract CGT (where the property is held for 7 years).

In an effort to increase activity in the property market, the multiple Stamp Duty rates for non-residential property have been replaced with a single rate of 2%. This lower rate applies to all non-residential property, including farmland as well as commercial and industrial buildings.

The highest income generator and possibly the most controversial is the increase in the VAT rate from 21% to 23%. This will raise an estimated €670 million. The government has guaranteed that there will be no further VAT increases during the life of this government.

A restricted form of Foreign Earnings deduction is being introduced and a special assignee relief programme is being introduced to attract key people to Ireland with the hope of facilitating development and expansion of business in Ireland.

Of the expenditure cuts announced yesterday, the most significant for businesses is the reduction in employers redundancy rebate from 60% to 15%. 

A big income generator is the household property charge of €100 per dwelling which is expected to generate €160 million.

While there has been no increase to income tax, social security and universal social charge, it is the additional annual charges, including the increases in VAT and motor taxes and the expected increase in private medical insurance that will have the biggest impact on family budgets in 2012.

Watch budget highlights on video and download pdf.

Imelda Prendergast is Partner - OSK Contracting, OSK Small Business Support