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Tuesday, 16th April 2024
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The other Budget Back  
The Minister’s Budget statement tends to be so much of the goods news as can be absorbed in time for print deadlines. It can be a poor guide to what ultimately emerges as a Finance Act.
Budget day is not a once off event. It is the start of a season. The Minister will continue his shedding of taxation veils in an elaborate dance that will not be complete until early March.

Further revelations will occur in mid-January when the Minister will publish a list of the principal contents of the Finance Bill. This is likely to include a number of items not mentioned in the Budget.

In turn, further disclosures of the Minister’s tax intentions will emerge when the Finance Bill, in its initial form, is published in mid-February. However the Finance Bill as initiated rarely bears much resemblance to the Finance Bill as finally passed by the D?il. The difference largely consists of reams of Committee Stage amendments, which will be published in early March at the commencement of the three day debate process in the D?il on the Finance Bill. It is on their publication that the full tax picture emerges.

Some of the new material which will be disclosed over the coming months will be in areas where the Minister kicked to touch in the recent Budget statement.
These include:
• Share option taxation: Will the Minister introduce a new approved share option scheme with a 20 per cent tax on exercise? Will he allow high flyers in a company to benefit disproportionately as has been done in the UK?

• Gain sharing: Approved profit sharing schemes permit employees to get up to ?10,000 per annum of company shares free of tax. But Irish private companies have proved reluctant to release their shares to the workforce. Unincorporated businesses and the State sector by definition cannot release shares.
Will the Minister extend the scheme so that profit sharing without a shareholder element will attract tax relief?

• The report of the Commission on the Private Rented Residential Sector called for a review of the 9 per cent stamp duty faced by residential property investors, and a reversal of the disallowance of interest as a deductible expense. They have also called for many of the tax reliefs normally available to a trade to be applied to actively managed residential property portfolios. Will the Minister implement the recommendation?

• The current special investment products (special deposit accounts and special portfolio investment accounts) are pretty much dead. The Minister has made provision for minor tax concessions on credit union savings and promised to talk to the rest of the savings industry about further tax incentives for saving. Will he drop the tax rate on the special savings products to zero percent as was done in the UK?

• The Minister promised last year to reform and liberalise the tax relief for educational fees to third level institutions. Full details will emerge only in the Finance Bill. He also promised to reform reliefs for gifts to charity. Again, the Minister has deferred his announcement until the Finance Bill.

The matters outlined above are those which the Minister has acknowledged are in play. Beyond that are threats not acknowledged in the Budget statement. The threat of a car park benefit in kind charge has not gone away.

On the occasion of each of the previous two Budgets the Civil Service planners published documents proposing that the effective tax rate on indigenous companies on trading income should be 20 per cent, and not the promised headline 12.5 per cent rate. They would seek to achieve the higher rate through a surcharge on undistributed trading income. This has neither been endorsed nor repudiated by the Minister and, although almost certainly contrary to EU law if it were attempted, hovers as a threat.

What is listed above are merely straws known to be blowing in the wind. This Minister always has the potential for surprise, and plenty of opportunities remain to spring one.

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