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Programme for Government 2020 – A Closer Look

  • Ireland
  • Corporate

29-06-2020

Overview

On 27 June 2020, the parties of Fianna Fáil, Fine Gael and the Green party formed a historic coalition government in Ireland. Following the election of Fianna Fáil leader Micheál Martin T.D. as Taoiseach, the previously published five-year Programme for Government entitled Our Shared Future (the “Programme”) was adopted by the newly formed Irish Government.

The Programme acknowledges that there will be greater clarity as to the likely economic impact of the Covid-19 pandemic (both domestically and internationally) when Budget 2021 is announced in October 2020.  With this in mind, the Programme states that Budget 2021 will include taxation measures aimed at reducing the budgetary deficit and funding required public services. It also confirms that these measures will be focused on tax rises in areas with negative externalities (such as carbon tax, sugar tax and plastics), such that any potential changes to the Irish tax system will encourage the more efficient use of resources.

We have outlined below the Irish Government’s tax policy commitments, as set out in the Programme, which are aimed at reigniting and renewing the Irish economy by providing a stable and sustainable tax environment.

29 June 2020

Policy Measure

Comment

Corporation Tax

  • The Programme reaffirms the commitment to maintaining the current 12.5% corporation tax rate, a long-standing cornerstone of Irish tax policy.
  • Along with continued engagement with the OECD on international tax reform, the Irish Government will continue to implement the Corporation Tax Roadmap (the “Roadmap”) (please see our separate article here in relation to the Roadmap).
  • Recognition is also given in the Programme to the need for taxation policy to reflect the changing nature of the digital economy. The Programme notes that work in this area is best done through the OECD, as opposed to by way of unilateral measures that could undermine trade.

FDI

  • The Irish Government has emphasised its commitment towards maintaining a supportive environment for FDI.
  • This includes a promise to not only maintain existing foreign investment, but also attract new investment and increase Ireland’s export capacity further, as well as developing the potential for Ireland to be a location of choice for resilient supply chains.

SMEs, entrepreneurs and small businesses

  • The importance of SMEs and entrepreneurs to the Irish economy is highlighted throughout the Programme, together with the stated aim of maintaining Ireland as an attractive location to sustain and grow existing business or to start and scale up new business.
  • The Irish Government has also committed to reviewing capital gains tax in each budget over the next five years with a particular focus on supporting innovation driven enterprises that will assist Ireland in transitioning to a low carbon economy. 
  • Greater take-up of the Research & Development Tax Credit by small businesses will continue to be encouraged.
  • The Programme has committed to legislating for the recently announced measures relating to the warehousing of certain tax liabilities (please see our separate article here in relation to the proposed tax warehousing scheme).

Personal Taxes

  • The Programme commits to not increasing the rates of income tax or universal social charge (“USC”).
  • While there will be no change to income tax credits or bands in Budget 2021, according to the Programme, it confirms that tax credits and bands will be index-linked to earnings with effect from Budget 2022.
  • The earned income tax credit for self-employed individuals will be equalised with the employee tax credit.
  • The 3% USC charge which applies to self-employed individuals will be reviewed with a view reducing the charge over time.
  • The home carer tax credit will be increased as subsidies for childcare are increased.

Real Estate

  • The Programme proposes to bring forward legislation for Local Property Tax (“LPT”) on the basis of fairness and that most homeowners will face no increase in the amount of LPT payable.
  • New homes (which are currently exempt from LPT) will be brought into the taxation system.

Climate change

  • The Programme acknowledges that Ireland has a major role to play in combating climate change.  In light of this, the Programme proposes to review and implement measures in respect of the following from a tax perspective:
    • revise Ireland’s commitment to increasing carbon tax by 2030 from €80 per tonne to €100 per tonne; 
    • direct a portion of the carbon tax proceeds towards climate focused measures in the agri-food sector;
    • review the existing motor taxation regime to ensure that it adequately captures the harm caused by nitrogen oxide and sulphur oxide (this will only apply to newly registered vehicles); and
    • examining the feasibility and merits of changing tax arrangements to encourage more people to work remotely. 

Health and wellbeing

  • The Programme includes a range of proposals intended to support continued health and wellbeing, including a targeted taxation regime to specifically discourage vaping and e-cigarettes.

Commission on Welfare and Taxation

 

  • The Programme commits to establishing a Commission on Welfare and Taxation (the “Commission”).
  • The aim of the Commission will be to independently consider how best the Irish tax system can support economic activity and promote increased employment while balancing the need to ensure that there are sufficient resources available to meet the costs of public services and supports in the medium and longer term. 

For futher information, please contact:

Alan Connell, Partner and Head of Tax Group - AlanConnell@eversheds-sutherland.ie

Melissa Daly, Senior Associate in our Tax Department -  MelissaDaly@eversheds-sutherland.ie

Robert Dever, Associate in our Tax Department - RobertDever@eversheds-sutherland.ie

Niall Pilkington, Solicitor in our Tax Department - NiallPilkington@eversheds-sutherland.ie

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