Budget 2019: These are all of the key developments as they happened
We unpick what this year’s announcements mean for business in Ireland.
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Here are the key points you need to know from Budget 2019:
- Filmmakers were among the big winners with the extension of film tax relief, while hoteliers and restaurants took one of the largest hits.
- The tourism and hospitality’s preferential 9% VAT rate has been axed, returning to its previous level of 13.5%. The move has already provoked an angry reaction from industry figures.
- There was plenty of money for various Brexit-related measures, which we’ve broken down for readers.
- Minor cuts to income tax and USC are coming for most workers, with the threshold for the top rate of income tax lifted by €750 for a single worker.
- For self-employed workers, the earned income credit will be increased €200 to €1,350 – although that still below the rate enjoyed by PAYE workers.
- The unloved KEEP share scheme, intended to help SMEs and startups attract and retain staff, will be tweaked in an attempt to make it more useful for indigenous firms.
- The EIIS investment programme - described as ‘not fit for purpose’ by startup industry figures - will go through an unspecified shakeup in the Finance Bill.
- Working parents will get an extra two weeks of paid parental leave from next year, to increase to seven extra weeks “over time”.
These are the key developments as they happened:
1.10pm: Donohoe has started his Budget 2019 speech, setting out a backdrop of a fast-growing economy and “a record number of jobs” – but also real and serious risks, not least from a dysfunctional housing market and the looming spectre of Britain leaving the EU.
“Brexit is the political, economic and diplomatic challenge of our generation,” he told the Dáil.
He said the budget will be balanced and sensible, with “significant” extra capital investment to improve the quality of life of people in Ireland.
1.15pm: Donohoe has confirmed the establishment of a Rainy Day Fund, announced in last year’s budget, with an initial €1.5 billion from the Ireland Strategic Investment Fund.
That would be supplemented with a €500 million contribution from the Exchequer starting next year, he said.
Some of the “historically high” levels of corporate tax would be set aside for capitalising the fund, he added.
More broadly, Donohoe said he expected the budget deficit to be cut to 0.1% in 2018 and for the budget to be balanced in 2019 for the first time in 12 years.
He added that it was the intention to run surpluses into the future “if the economy continues to perform well” and to pay down State debt.
1.25pm: Donohoe said the goverment would prioritise increases in capital spending in the budget in line with the Project Ireland 2040 plan.
There would be a total of €7.3 billion put aside for capital spending on infrastructure, including more than €500 million for ports in Dublin, Cork and Shannon.
The budget included funding of €2.3 billion for the State’s housing plans, while personal tax cuts would be worth a combined €291 million next year. New revenue-raising measures in the budget would be worth €700 million.
Donohoe said €1.25 billion was being put aside next year for 10,000 new social homes to be either built, acquired or refurbished.
There would also be 100% mortgage interest relief on any loan used to buy or improve a rental property from next year, up from the current rate of 85%.
1.40pm: Donohoe said he would be rolling out a new paid parental leave scheme from November 2019 to provide two extra weeks of leave to every parent of a child in its first year. He added that he intended to increase this to seven extra weeks over time.
There would be a ‘further modest increase’ of 0.1 points next year and the same again in 2020 for the levy on businesses that is used to fund the National Training Fund. That would bring the rate up to 1% within two years.
The government would also be rolling out a ‘Future Growth Loan Scheme‘ worth up to €300 million for SMEs in the agriculture and food sectors, Donohoe said.
On other startup and SME-friendly measures, the Finance Minister said he was aware that the KEEP share scheme had seen low take-up to date.
With that in mind, he was increasing the ceiling on the market value of shares that could be granted in a year to 100% of a worker’s salary, and replacing the three-year-limit on the scheme with a lifetime limit.
On EIIS, Donohoe said he intended to bring forward “a priority package of measures” in the Finance Bill to address problems with the scheme, although he didn’t provide further details of the changes.
On corporate tax, there would be an ‘exit tax’ of 12.5% on capital gains for companies’ intellectual property when it was transferred out of Ireland. The rate is well below the 33% rate that applies to capital gains more broadly.
The budget will include a ‘future growth loan scheme’ for SMEs in the agriculture and food sectors, with €110 million set aside for Brexit-mitigation measures across various government departments, he added.
And one of the old favourites has been rolled out again, with the excise duty on a pack of 20 cigarettes to be increased by 50c.
1.50pm: The much-discussed 9% VAT rate for the tourism sector will be axed next year despite fierce lobbying from the industry.
Donohoe said a government review found that the reduced rate had “done its job” in stimulating the sector during the recession.
He added that returning the rate to 13.5% would be worth €466 million in extra revenue next year, allowing the State to reduce its reliance on other tax heads like corporation tax.
Donohoe said he would be allocating another €35 million for the Department of Transport, Tourism and Sport to provide “more targeted supports” for the sector.
1.55pm: Donohoe said that he would be extending Section 481 film relief on corporate tax, which was due to expire in 2020, until 2025.
He would also be extending the three-year tax relief for certain startup companies, also known as SURE, to the end of 2021.
On crowd funding, Donohoe said the sector, with appropriate regulation, could “play an important role in broadening competition in the SME finance market”.
His department would start working on that regulation in conjunction with the Central Bank, he said.
Meanwhile, the 9% VAT rate on newspaper publications would be maintained, while the rate would be reduced from 23% to 9% on electronic news publications.
Betting duty on exchanges would be increased to 25% from its current level of 15%, which was expected to bring in an extra €40 million next year. The betting tax would also be doubled to 2%.
A potential increase to the carbon tax, widely discussed before the budget, has been shelved. Donohoe has instead elected to add a 1% VRT tax surcharge for diesel vehicles across all bands.
2.10pm: On income tax and USC, the government is lifting the threshold on the higher rate of income tax by €750 to €35,300 for a single worker.
The main rate of USC would also be cut from 4.75% to 4.5%, while the ceiling at which it kicked in would be increased from €19,372 to €19,874.
That measure was introduced to make sure employees working full-time on the new minimum wage, which was being increased to €9.80 per hour, wouldn’t lose out from their slight earnings increase.
Our colleagues at TheJournal.ie have a handy budget tax calculator to show what the personal tax changes mean for your hip pocket.
The earned income credit for self-employed workers will be increased €200 to €1,350 – although that remains below the level enjoyed by PAYE workers.
