Taxing Times

The Minister for Finance introduced the 2023 Budget on 27 September 2022. Further detailed measures will be included in the Finance Bill to be published on 20 October 2022.

Budget 2023 was framed by the Minister for Finance as a “cost of living budget” with the stated aim of helping individuals, families, and businesses to deal with rising prices. The minister also acknowledged the need to strike a balance between providing support to offset the rising cost of living and ensuring the stability of public finances in the face of potential future economic shocks. To this end, the minister confirmed that €2 billion this year, and €4 billion in 2023, will be directed into the National Reserve Fund. 

In summary, the tax measures announced amounted to €1.1 billion out of an overall budgetary package of €11 billion. The overall package was very substantial and was enabled by very strong tax receipts in the current year and projected increased receipts in 2023. The measures were both broad-based and targeted ensuring there was something for everyone. 

To assist individuals and families deal with inflationary pressures, a number of tax measures were announced, including: 

• An increase of the standard rate cut-off point by €3,200 to €40,000 
• An increase in the 2 per cent USC rate band from €21,295 to €22,920 
• Increases to the personal, employee, earned income and home carer tax credits 

A temporary business energy support scheme is to be introduced to assist businesses over the coming months. Eligible businesses will be able to reclaim 40% of the yearon- year increase in their energy bills up to a monthly cap of €10,000 per trade. The minister emphasised the importance of tackling the housing crisis and climate change, which featured in a number of the measures announced, including: 

• The extension of the Help-to-Buy scheme to the end of 2024 
• The introduction of a rental tax credit of €500 per annum 
• The enhancement of the pre-letting expenses regime for landlords 
• The introduction of a vacant homes tax 
• An increase in carbon tax on petrol and diesel of €7.50/tonne to be offset by a reduction in the National Oil Reserves Agency (NORA) levy 
• The introduction of an accelerated capital allowances scheme for farmers for the construction of modern slurry storage facilities 

Looking forward, the minister has committed to preparing a medium-term roadmap for personal taxation reform following the release of the recent report of the Commission on Taxation and Welfare. The minister also reaffirmed Ireland’s commitment to the OECD’s twin pillar tax reform and that a move towards a territorial corporation tax system is under serious consideration. 

The total budgetary package of €11 billion was provided against an economic background of inflationary pressures (forecasted at 8.5 per cent for 2022) and slowing domestic growth (forecasted modified domestic demand of just 1.25 per cent for 2022). With the understandable focus on cost of living measures, it was broadly expected that there would be a limited number of tax measures to maintain our attractiveness to inward investment and entrepreneurs in the coming year. It is hoped that there can be a renewed focus on these policy goals in future Budgets.