The 2018 Budget feels very déjà vu in that it lacks any meaningful measures. We are all about €20 a month better off in reduced direct taxes but will have to deal with price increases as a result of more VAT and Employer’s PRSI. There is nothing to get too enthusiastic about or too angry about and I guess that is the whole point. Ordinarily, this approach would be fine if the country wasn’t facing some huge issues such as climate change, property supply, high personal taxes, and pensions shortfalls that are set to bite us badly in the medium to longer term. I would have preferred to see a more courageous budget with more leadership and vision.
Climate change is a ticking time bomb for us all and one that is getting closer and closer. By not taking this on, Ireland is not only passing up the opportunity to be a leader in this area but is set to completely fail in its international commitment to reduce carbon emissions by 2020. We are currently forecasting a 1% decrease instead of the 20% we committed. We understand the government had intended to bring in a number of stronger measures with this budget to reduce carbon emissions however backed out at the last moment.
There is a critical shortage of housing in the Dublin area. It feels like the property sector is being managed with the interests of the governing elite and bankers being put before the interests of the people. There is a huge hidden cost to this strategy as it puts upward pressure on wages, makes Ireland a less attractive place to live and work, and it is a negative for foreign companies investing here.
Obviously, we welcome the minor reductions to USC and PAYE and the extra €200 on the earned income tax credit; however, they do not go nearly far enough. Tax rates for individuals are still up to 52% for someone earning over 70k. Capital Gains Tax is also too high (33%) and needs to come back down to the 20% it was at previously. The economy is doing well now with GDP growth forecast at 7.5% this year and 4.2% next year, yet the government is still hanging on to the austerity measures introduced after 2010. Entrepreneur Relief remains one of the best tax saving schemes for business owners and can result in tax savings on disposing of the first €1 million profit on the sale of a business. In the UK, this limit is £10m and we are disappointed not to see an increase in Ireland. There are a number of other special schemes in place to help SMEs that have not quite hit their mark, such as the SURE scheme, EIIS, Start-Up Tax Relief, and the KEEP schemes. Because of overly restrictive conditions, the take up has been so low to lead some commentators to suggest the measures were introduced primarily for PR purposes and not intended to be widely used. We would like to see the Minister follow through on his commitment to simplify the conditions on these schemes so as to increase their uptake.
There is a recognition in Europe that Brexit will potentially have an adverse impact on parts of Europe and in order to help they are loosening purse strings to offer grants and loans to negatively impacted sectors. Of all the countries in Europe, Ireland is likely to be the one most affected by Brexit and as such Ireland is well placed to benefit from these European measures. In this Budget, we saw a trickle-down of these measures with the introduction of what is called the Future Growth Loan Scheme which will offer softer, longer-term loan finance options for Irish SMEs. The area of Brexit supports is an opportunity as we are speculating there will be soft money available in the name of Brexit to Irish companies who can make any reasonable case for them.