By Nicola Fitzpatrick, 11th October 2023
Minister Michael McGrath relayed yesterday that looking at the state of the Irish economy there are many positives, including a country at full employment with a record high of over 2.6 million people at work.
The minister also acknowledged there are capacity constraints in the economy, and these are most obvious in the housing and labour markets.
Minister McGrath stated “Our key export markets are experiencing an economic slowdown, and this has impacted on our recent export performance. While the Irish economy is in a strong position today, I am all too aware of the potential risks that may materialise from global events or sectoral shocks.”
In the decade preceding the pandemic, inflation has averaged just half a percent per year. In 2022, inflation averaged over 8% across the year, and most recent data shows inflation at 5% in September. Minister McGrath’s department predicts an average inflation rate of 5.5 % this year. An inflation of 2.9% is projected for next year.
Minister McGrath announced the windfall of corporate tax receipts which fell sharply in the summer months. Minister McGrath’s department estimates that the ‘windfall’ of corporation tax receipts stands at €10 billion – €12 billion.
Minister McGrath relayed that the use of windfall receipts must be used wisely and not allow them to fund current expenditures.
Net core public spending will increase by 6.1% next year and the total budget package comes to €14 billion. Core expenditure package of under €5.3 billion, a tax package of €1.1 billion, and a total core budget package of €6.4 billion.
In addition, there is non-core expenditure of €4¾ billion, including an additional €250 million for the public capital programme funded by windfall corporation tax receipts.
Key Budget Measure 2024
- An additional €250 million for the public capital programme.
- Personal income tax package to the value of €1.3 billion.
- Once-off cost for living measure of €2.7 billion.
- Net-core expenditure of €4.75 billion.
- Increasing the personal, Employee PAYE, and earned income tax credits by €100 each.
- Increasing the standard rate income tax cut-off point by €2,000.
- Reducing the 4.5% rate of USC to 4%.
- National minimum wage will increase by €1.40 per hour to €12.70 per hour.
- Raising the USC entry threshold to the 4% rate to €25,760.
- A single person earning €46,000 in 2023 will see an increase of over €2,000 in their net income.
- Extending the USC concession for a further two years.
- Extend the 9% reduced VAT rate for gas and electricity for another 12 months.
- Increasing the R&D tax credit from 25% to 30%.
- Minister McGrath doubled the first-year payment threshold from €25,000 to €50,000, to provide valuable cash-flow support to companies engaged in smaller R&D projects.
- Targeted capital gains tax relief for angel investors in innovative start-up SMEs.
- In line with the government policy on the age of retirement, Minister McGrath extended the upper age limit for the relief from 65 until the age of 70. The reduced relief which was available on disposals from age 66 onwards will now apply from the age of 70.
- Increasing the existing VAT registration thresholds for businesses.
- Revenue will establish a dedicated Tax Administration Liaison Committee (TALC).
- Extending the VRT relief for battery electric vehicles to the end of 2025.
- Increasing the Charity VAT Compensation Scheme from €5 million to €10 million.
- Establishing a new savings fund “The Future Ireland Fund”. using some windfall corporation tax receipts – this fund will benefit, children, workers, and pensioners, and help us to meet the cost of running the state.
- Invest 0.8% of GDP annually into The Future Ireland Fund from 2024 to 2035.
- The Employment Investment Incentive Scheme (EII) provides SMEs and start-ups with an alternative source of funding. Minister McGrath will be enhancing the scheme by:
- standardising the investment period to four years for all investments, and
- doubling the amount an investor can claim relief on four-year investments to €500,000.
- Key employee engagement programme – EU state approval to commence outstanding 22 amendments to this programme.