Tax Services

Key tax developments in the plan

The National Recovery Plan 2011-2014 presents a detailed package of fiscal measures designed to achieve a budgetary correction of €15bn over the next four years. Some of the key tax developments highlighted in the plan are:

Personal tax

• No increase in marginal tax rates expected but 16.5% reduction in bands/ tax credits over period to 2014  -significant front-loading but no details
• Reliefs to be abolished in 2011 include:
  – patent royalties
  – approved share option schemes
  – BIK exemption for employer provided childcare
  – accelerated capital allowances for farm buildings for pollution control
  – phased abolition of relief for private rental accommodation
  – trade union subs
  – phased abolition of income tax age credit
  – phased abolition of income tax age exemptions
  – PRSI/ levy relief on share schemes to disappear
  – artists exemption to be capped at 40k earnings
  – ex-gratia termination payments and pension lump sum payments to be capped at 200k
  
• Legacy' costs associated with property based incentives worth 400m will be phased out over the four-year plan

Pension relief changes

• No PRSI/ health levy relief in 2011
• Reduction in income tax relief by 7% per annum to 20% from 2012 to 2014.
• Annual earnings ceiling for contributions to be reduced from 150k to 115k from 2011
• Similar changes to public sector pension levy

Indirect taxes

• VAT rate to rise from 21% to 22% in 2013 and to 23% in 2014. Lower rate remains unchanged and zero rated items to be examined
• Miscellaneous excise measures to raise €110m in full year

VRT and motor tax bands
The bands are likely to be adjusted to increase taxes due to 'technological developments'

Corporation tax
No change to 12.5% rate of CT - strong commitment to same in plan

Carbon taxes
To be doubled by 2014 starting in 2012 €10 per tonne and in 2013 €5 per tonne

Capital taxes
CGT, stamp duty and CAT bases to be broadened by elimination and restriction of reliefs
CAT thresholds to be reduced in 2012

• CGT rate to move from a single 25% rate to multiple rates that will differ based on the amount of the gain
• Site value tax to be introduced in 2012 - interim amount is €100 with final tax based on valuations in 2013 (estimated at 200 on average)

Business expansion scheme
To be replaced with a BITES scheme (subject to EU approval)