The 2013 budget has just been announced and we have been promised the worst is over. Today's Budget announced €3.5 billion in spending cuts and tax measured which is designed to allow Ireland to exit the programme for austerity and wave goodbye to the Troika next year.
From an employers perspective there have been a number of notable items that will have a direct impact on those running a business, and are items which employers should be aware of as no doubt employees will be asking questions on these issues in the coming days and weeks.
The main talking points of todays budget will no doubt be
- Maternity Benefit will be treated as taxable income from 1st July 2013. As is the case with all social welfare payments, Maternity Benefit will continue to be exempt from the Universal Social Charge (USC). This is sure to cause controversy as Maternity Leave holders typically will receive close to €280 per week and this will now be treated as taxable income.
- No sick pay scheme has been introduced in the private sector, which was long hinted by Minister for Social Protection Joan Burton. This highly unrealistic objective was dismissed by Enda Kenny earlier in the year when he stated that the public sector sick pay would need to be sorted before looking at the private sector, however doubt still lingered as to whether or not this would happen. It is a reasonable step taken not to introduce such a scheme.
- Increase in USC for over 70s with incomes of €60,000 and above, which is in keeping with leaked reports, and those over 70 years of age seemed to get a bit of a rough time in this years budget.
- Corporation tax remains unchanged at 12.5% which is very much a positive step as there has been a lot of pressure from Europe to cut this rate, which is one main reasons Ireland has received FDI
- Those with Company car schemes will be relieved that there has been no increase on petrol/diesel
According to the Minister for Finance work is being finalised on the “PlusOne” scheme, which will provide a strong and clear financial incentive to employers to hire more people who are long-term unemployed, replacing Revenue Job Assist and the Employer PRSI Incentive scheme. A package of new tax measures to support SMEs was also outlined by the Minister for Finance Michael Noonan, including:
- A 25% increase in the threshold for VAT cash receipts basis accounting, to improve cashflow for SMEs. The threshold will be increased from €1million to €1.25million
- Doubling the amount of expenditure that qualifies for the R&D tax credit for SMEs, to support more innovation by businesses. The threshold that applies without reference to the ‘2003 base year’ (which principally applies to larger businesses) has been increased from €100k to €200k
- Extending the Employment Investment and Incentive, which was due to run out in 2013, to 2020. This supports investment in businesses by providing income tax relief of up to 41% on investments totalling up to €10million per company
- Measures to reduce the burden of tax compliance for start-ups and small businesses, including improvements to the 3-year Corporation Tax Relief scheme and moves to look at ways of reducing costs of compliance for micro businesses
- An extension of the Foreign Earnings Deduction scheme, to support exporting companies putting “boots on the ground” in 8 more countries
Measures were announced to support companies in need of credit;
- The National Pensions Reserve Fund is developing a range of support funds for the SME sector, initially ranging in size from €100million to €400million, to provide equity, credit and recovery investment
- Continued implementation of the €90million microfinance scheme, the €450million Credit Guarantee Scheme and the €120million second call under Innovation Fund Ireland
- Increase to €4billion of the lending targets for the two pillar banks for 2013. Both banks are on course to meet their 2012 targets of €3.5billion
- Improvements to the Credit Review Office including extending its team of reviewers. The CRO has overturned over half of the bank lending decisions which have been appealed to it.
Jobs were high on the agenda with Minister Bruton announcing that his Department’s capital budget has been broadly protected for 2013 with a total allocation of €505million after agreement was secured on retention of own resource income and capital carryover. Among the measures this will deliver include:
- Delivery of DJEI measures under Action Plan for Jobs 2013, to be announced early next year
- IDA will target approximately 12,000 new jobs in 2013 with its capital budget fully protected
- Enterprise Ireland will support 95 new High Potential Start-Up companies with commitments to create at least 1000 new jobs. EI through the new Potential Exporters Division will also engage with 300 new first-time exporting companies
- Delivery of an enhanced support structure for micro-enterprise and small business through a Centre of Excellence in Enterprise Ireland and Local Enterprise Offices
Employers should be aware that employees may be hit hard by some of the measures in the budget with increase in cigarettes and alcohol as is the norm in the budgets by now, a decrease in Child Benefit by €10 per month, and motor tax to increase from January 1st. This along with the long awaiting property tax (0.18% on homes up to €1m and 0.25% thereafter) will mean a lot of employees will be feeling the pinch in 2013.
The focus on jobs and lending is positive for SMEs and should hopefully see an increase in jobs and productivity in 2013. There is much hard work still to be done but according to Michael Noonan the worst is over...
