Irish finance minister Donohoe continues ‘Brexitproofing’ in first Budget
Irish finance minister Paschal Donohoe said capital expenditure and a broader tax base would help ‘Brexitproof’ his country in his first Budget since taking over from predecessor Michael Noonan
10 Oct 2017
Ireland’s national horizons are now different, with a ‘permanent changes in trading patterns’ brought on by the UK’s vote, he said in a Budget speech lasting an hour, highlighting ‘risks and challenges’ that the country now faces.
The use of the the term 'Brexitproofing' has echoes of Noonan's efforts to 'insulate Ireland' from the effects of Brexit in his final Budget last year.
To that end, Donohoe focused on ‘broadening our tax base to make it more resilient and secure on the future’, announcing a mix of revenue-raisers and spending plans, alongside a ‘rainy day fund’ which will start with a €1.5bn contribution from Ireland’s Strategic Investment Fund.
Key fundraisers include a rise in the commercial stamp duty rate from 2% to 6%, a move expected to raise €400m (£357m) and a vacant site levy which will rise from 3% in the first year to 7% in the second in a bid to free up land for housing construction.
However, he also highlighted the need for stability, insisting Ireland’s 12.5% corporation tax rate ‘is, and remains, a core part’ of its offering as it continues to seek to attract foreign direct investment. Any mention of Apple and the European Commission, however, was conspicuously absent.
For SMEs adversely affected by Brexit, Donohoe announced a Brexit loan scheme. He told Ireland’s parliament, the Dáil, that up to €300m will be available at ‘competitive’ rates to SMEs, particularly food businesses given their ‘unique exposure to the UK market’, to help them with their short-term working capital needs.
Away from Brexit, the higher rate income tax band of 40% was increased by €750 from €33,800 (£30,223) to €34,550 (£30,894).
Actively pursuing more foreign investment, Donohoe announced €23m more for Foreign Affairs and Trade to ‘grow our global footprint’ of staff. Following a similar vein, the VAT rate of 9% for the tourism and services sector was maintained.
In line with the UK, the finance minister announced a sugar tax, of 30 cents per litre of tax on drinks with over 8g of sugar per 100ml. A reduced rate of 20 cent per litre will be brought on drinks with between 5g and 8g of sugar per 100ml. The levy will commence in April 2018.
The 5% rate of universal social charge (Ireland’s equivalent of National Insurance), which applies on income between €18,800 and €70,000, dropped by 0.25%, and the 2.5% rate, which is applied between €12,200 and €18,800, dropped by a half percentage point.