Jobs Initiative 2011

The Minister for Finance, Michael Noonan, T.D announced the Government’s much anticipated Jobs Initiative 2011 this afternoon.  In the Initiative he outlined a number of proposals aimed at incentivising entrepreneurship and job creation including specific measures for the tourism sector, labour activation initiatives on public capital projects on schools, roads and retrofitting and measures to improve access to credit for SMEs. 

A number of other specific tax measures were included in the Jobs Initiative.  These measures include:

1. Enhancement of the R&D Tax Credit Regime

The Government is committed to enhancing flexibility for companies in accounting for the R&D credit above or below the line.  This should serve to improve the competitiveness of our R&D offering particularly for foreign direct investors.

2. Share-Based Remuneration – Employer PRSI Abolished

The charge to employer PRSI on share based remuneration, announced in the last Budget, is to be abolished with effect from 1 January 2011.  The Minister recognised the impact created by this increased business cost.

3. New 9% VAT Rate

A new temporary second reduced rate of VAT at 9% has been introduced for a range of goods and services in order to stimulate employment.  The supplies affected are broadly, but not exclusively, focused on the tourism sector.  This new reduced rate of VAT will be introduced with effect from 1 July 2011 and will apply until the end of December 2013.  Revenue this evening have published a full list of the supplies of goods and services subject to the new reduced rate

The impact of the new rate on the tourism sector will be reviewed before the end of 2012 in the context of preparing Budget 2013.

4. 8.5% Rate of Employer PRSI Halved

The lower rate of employer PRSI (8.5%) is to be halved on jobs paying up to €356 per week.  This change is to take effect from 1 July 2011. The level of the minimum wage is to be reinstated on this date also.

This PRSI change applies to all employees earning up to this income level (and not just new employees) and will affect circa 600,000 workers.

The Minister also confirmed that the existing Employer Job (PRSI) Incentive Scheme is to remain in place until the end of this year. This scheme exempts employers from the liability to pay their share of PRSI for certain employees for 12 months.

5. Annual 0.6% Pension Levy

The Minister noted that the measures in the Jobs Initiative will be funded by way of a temporary levy on funded pension schemes and personal pension plans. A levy of 0.6% is to apply to the capital value of assets under management in pension funds established in the State. This levy will apply for 4 years.

Imelda Prendergast - Partner OSK Small Business Support