Published: Wednesday, 16th December, 2009 4:30pm

RBK and Ulster Bank host budget breakfast briefing

Over 200 members of the Athlone business community attended a post-budget briefing last Thursday at the Sheraton Hotel following Minister for Finance Brian Lenihan's budget announcement yesterday. The briefing was co-hosted and sponsored by Russell Brennan Keane and Ulster Bank.

Mairead O'Grady, Tax Partner, Russell Brennan Keane, provided detailed tax analysis of the initiatives introduced in the budget and Simon Barry, Chief Economist, Ulster Bank, gave his analysis of the measures taken in Budget 2010 in the context of the outlook for the Irish economy and public finances.

Commenting on the proposals Mairead O'Grady said: "It will be some time before it will be possible to assess the impact of some of the measures on businesses and on the wider economy. She also said that similar to his previous budgets, Minister Lenihan has given an indication of what to expect in terms of budgetary measures in future years where he has committed to reforming our tax system and widening the tax base through water charges and property tax so as to provide more sustainable sources of Exchequer Revenue."

Simon Barry, Chief Economist, Ulster Bank, added: "The overall thrust of the budget is welcome. It represents another very important contribution to the absolutely necessary process of stabilising the public finances. However, the Minister was a touch shy of the €4 billion expected budget day package as the total announced package reached €3.8 billion. It appears as if the cuts in the public sector pay bill were not as severe as expected, with a €1 billion package, somewhat shy of the rumoured €1.3 billion."  

"This budget distributes an awful lot of pain but the reality is that the scale of the problem means that there is more to come with a further €3 billion in cuts expected in next year's instalment including a further €2 billion in current spending measures. The actual announcement of the much-flagged cut in the public sector pay bill will do little to relieve strains between the public sector unions and the government, and the need for further savings in day to day spending will likely see tension levels between the government and the social partners remaining high over the coming year," said Simon Barry.

"The Minister had made it very clear in advance that, other than the carbon tax, further increases in taxation would not be appropriate for the economy. At the same time he had to face certain commercial realities and had to reduce the excise duty on alcohol and reverse the Vat increase to try to counter the cross-border shopping," said Mairead.

Indeed many of the key changes, predicted in advance of the budget, were confirmed such as;

The introduction of a carbon tax of €15 per tonne which will have immediate affect on the price of petrol and auto diesel with other fuels and gas to take effect from May 1, 2010. Coal and commercial peat is to be the subject of a Commencement Order.

The introduction of a car scrappage scheme effective from January 1, 2010 whereby VRT relief of up to €1,500 will be granted on cars of 10 years or older which are replaced by the purchase of a new car with emissions of less than 140g/km.

Reductions in a wide range of social welfare payments including child benefit and in public sector pay which are being introduced on a tiered basis.

Like all budgets he introduced some new unexpected measures to include:

A new Irish domicile levy of €200,000 per year on non-resident domiciled individuals.

Mortgage interest relief to be extended to 2017 for those who find themselves in negative equity and for new qualifying loans taken out up to 1st July 2011 with transitional relief to the end 2013.

Restrictions on the cap for granting tax reliefs to high earners so that there is an effective rate of 30% tax for those subject to the full restriction. The entry level for the restrictions is also being reduced to €125,000.

Extending the relief for start up companies to 2010.

According to Mairead, a number of these changes were recommended in the report on the Commission on Taxation.

She added: "Unfortunately the Minister did not use the opportunity to reduce employers' PRSI, alter the Stamp Duty rates or introduce specific job creation initiatives or measures that might stimulate the depressed property market."

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