Budget 2021 - Planning for recovery

"Brexit may have been in the first line but, as expected, this was a firmly Covid related budget in tone and measure. Despite better headline economic performance than most peer economies, the Minister for Finance did not dwell on this, as might have been expected, and instead focussed on the rise in unemployment and the need to spend more to address the pandemic damage. The increase in spending of €17bn is significant. To put in context this is more than annual PAYE returns or nearly three times annual excise tax receipts. Ensuring that the extra money is spent effectively and avoiding a sharp step up in the cost of public service delivery in future years will be challenges to face in the year ahead.

“In a Budget mostly about the ‘here and now’ there were a few hints about the future direction of the coalition Government. As the Minister spoke about a bridge to a better tomorrow, he referred to the Commission on Taxation on Welfare, a recognition of the need to think strategically about how to meet public sector costs and achieve long term aims through the tax system. There was also a paper on well-being indicators published, further reflecting the move away from headline growth as the measure of Ireland’s success. It was perhaps not surprising then that the GDP numbers did not feature more prominently in the speech."

"My take is that the VRT discussed will be revenue raising and only the carbon tax will be ring-fenced as stated last year.  I think that in an ordinary year the government could have been pushed to ring fence all carbon/emissions related taxes to further the green agenda but in the current climate it is understandable why they may not. While not quite a “green” budget the government is taking us in the right direction albeit the pace is still not quite fast enough due in some part to the lack of supportive infrastructure."

Innovation

"The budget was pitched to focus on the immediate challenges, but the Minister clearly had an eye towards the future economy and the critical role that innovation has to play in that.

It is good news that the knowledge development box that supports R&D has been extended by 2 years to 31 Dec 2022.  The proposal to look at a new tax credit for the digital gaming sector from 2022 is very welcome. In addition, the mandate announced by the Minister to form a group geared towards leveraging European capital with a view to establishing an equity fund to invest in domestic, high innovation enterprises builds on Ireland’s exiting suite of innovation incentives. All this underlines the importance of innovation in Ireland’s future competitiveness.

Given the increasingly important role of the knowledge economy and the need for Ireland to continue to remain internationally competitive, we would have liked to have seen a 4-year extension to the knowledge development box. This would provide even greater certainty to business and encourage more taxpayers to avail of this regime. We will continue to engage with Government to seek the improvements we feel are still needed here."

Today’s Budget shows the Government’s continued commitment to infrastructure investment in Ireland and the acknowledgment that infrastructure can act as a critical element of the country’s economic recovery following the grave and on-going impact of the Covid-19 pandemic. 

An increase of €1.6billion on capital expenditure programmes in 2021 and an overall increase to €10.1billion for capital expenditure focussed on housing, public transport and schools is an overwhelming positive response from Government and we look forward to understanding further the plans for the €3.4billion Recovery Fund to be established which will focus on infrastructure development; reskilling and retraining and supporting investment and jobs as well as the other investment channels today’s Budget sets out to support the country’s recovery.