Almost 200 business executives from the greater Shannon area attended Shannon Chamber’s Budget 2016 briefing in the Bunratty Castle Hotel on Wednesday, 14 October. This very popular annual event gives chamber members and their business associates the opportunity to hear, first-hand, the key elements of the Budget and their impact at a business and personal level. This year’s briefing was expertly delivered by Grant Thornton’s tax director, Theresa O’Gorman and tax assistant manager Annemarie O’Brien.
Giving a wide-ranging review of Budget 2016 and its impact at a personal tax level, on entrepreneurs, farming, corporate tax, capital taxes and tax administration, the presentations were in-depth and informative.
Speaking at the event, Shannon Chamber director Ian Barrett said that austerity fatigue and a growth in tax receipts gave the Government room to deliver the first expansionary budget since the onset of the recession.
“From a Chambers’ perspective, Budget 2016 was an opportunity to adopt measures to reinforce Ireland’s growth, generate a new energy amongst our indigenous industries and insulate the economy from internal and external risks.
“In our pre-budget submission, via Chambers Ireland, we recommended government to focus on four key areas:
- Supporting our entrepreneurs and small businesses
- Supporting local economic development
- Investing in physical and social infrastructure
- Enhancing efficiency in our public service
“Under each of the headings above, we outlined concrete proposals for Government to consider. We have repeatedly called for the implementation of all of these proposals in our engagement with Government representatives throughout the year as well as in our PR activities.
“We were pleased to see that many of our recommendations were included in the budget, in particular the recognition of entrepreneurs and businesses as being drivers of economic growth,” Mr Barrett added.
Good for Business, Good for Consumers, Good for Families
“Overall, Shannon Chamber broadly welcomes the budget. In particular, we welcome the first step towards putting the self-employed on an equal footing with the PAYE workers and the decision to reduce USC on income up to €70,044. These important measures will help businesses in all regions of the country, including the Shannon region, and will ensure that people have more money in their pockets to spend which will support our indigenous economic development.
“We also commend the decision to extend the Early Childhood Care and Education (ECCE) scheme to cover a second free year and to allocate funding for establishing after-school care in existing schools. While it will take years to fully tackle the affordability and accessibility of childcare services, these moves are important first steps that will provide relief for parents all over the country and will make it easier for them to remain active in the labour market…
But the job is not yet done
“Despite some important steps in the right direction, we believe there are a number of areas where the budget did not go far enough.
- The threshold of €1 million for 20% CGT is very low and will not significantly encourage new investors and should therefore be raised.
- Self-employed people earning above €100,000 remain liable for a 3% USC surcharge above their PAYE counterparts. We would like to see some movement in this.
- Obstacles remain within the tax system which works against employee share ownership models, which are proven to boost productivity, company profits and staff retention rates.
- No real solutions to the lack of supply of housing were presented. In some ways it is positive that the budget did not see a knee-jerk reaction that might further distort the market in the future. Nonetheless, we had sought a reduction to 9% in the rate of VAT applied to residential housing. A reduction in this could have ameliorated some of the problems of lack of affordability until longer-term supply side solutions are introduced.
“There are also notes of caution around not repeating the mistakes of the past and excessively erode the tax base or set unrealistic expectations for the future. Ireland cannot afford to forget that we are hugely exposed to external shocks. We are heavily reliant on ongoing growth in international markets and we are still borrowing to fund current expenditure. Neither of these is a problem so long as international confidence is high, and interest rates are low. This is not a scenario that can last, because at some point in the future, the Irish economy will be hit by an external shock.
“The changes to USC in the budget removed a further 42,500 people from being liable for the tax. Maintaining as broad a tax base as possible will, however, be important for the sustainable management of public finances in the years to come. It is estimated that a total of 700,000 income earners will not be liable for USC at all from next year. By further eroding the base of taxpayers the State is left exposed at a time when we are still facing external risks to the economy, and this measure feeds into the pro-cyclical habits of the past,” Mr Barrett concluded.