- The risk of No-Deal Brexit have forced the government to channel additional resources to Brexit related funds in order to prepare for the worst case scenarios.
- The housing package sees the allocation of €2.5 billion to the Housing Programme and extensions of the Help to Buy scheme and the Living City initiative.
- In line with the Climate Action Plan the Carbon Tax has been increased from €20 to €26 per tonne and several incentives have been extended to promote the use of Electric and Hybrid Vehicles.
- An average taxpayer will not see any changes to their take-home pay but parents will appreciate an increased age limit for free medical services for children.
The deadline for Britain’s departure from the EU has been recently extended until 31 January 2020 but the details of the Brexit deal and indeed Brexit itself is far from certain. The British PM Boris Johnson called for an early parliamentary election to take place on 12 December 2019. He is confident that the result of the election will strengthen his mandate to push the Withdrawal Agreement he negotiated with the EU through the House of Commons in order to formally exit the EU by the agreed date. Democratic elections, however, sometimes produce unexpected results. In the pessimistic scenario, if in the aftermath of the elections Boris Johnson is unable to secure a majority vote in favour of his deal, the risk of a No-Deal Brexit would increase dramatically. At the same time, and maybe more optimistically, an upset in the vote could pave the way to halting the Brexit process altogether.
Back in October, even before the recent extension to the Brexit deadline, the Irish Finance Minister Paschal Donohoe referred to No-Deal Brexit as the ‘most pressing and immediate risk’ to the Irish economy. Unsurprisingly, the 2020 budget is often referred to as the 'Brexit Budget'. Indeed, the Brexit measures outlined by Mr Donohoe show how serious the government is about ensuring Irish economy is Brexit-ready.
The Brexit package will consist of a total of €1.2 billion. This includes €650 million in contingency funding in the case of a No-Deal Brexit. These funds will be spent on upgrading port and airport infrastructure, staffing, IT, and general Brexit-proofing of the economy. Brexit uncertainty is quoted as the reason for not allocating the promised extra €500 million to the Rainy Day Fund (funds to be activated in case of a severe economic downturn).
The government will allocate €2.5 billion towards housing. This includes the delivery of new social housing and extending popular initiatives such as Help to Buy scheme and Living City initiative. Help to Buy scheme allows first time buyers to get up to 5% of the value of the property as tax back. Living City initiative provides a tax relief on refurbishment and conversion works of properties located in historic inner city areas.
Climate Action Plan
Carbon tax has been increased from €20 to €26 per tonne, which is a step towards the target of €80 per tonne tax rate by 2030. Carbon tax applies to kerosene, marked gas oil, liquid petroleum gas, fuel oil, natural gas and solid fuels. It has an immediate effect on increasing the cost of high-carbon heating systems. Funds collected from the carbon tax will be reserved for further measures to decarbonise Ireland.
Climate Action package also includes an extension of a 0% benefit-in-kind (BIK) rate on electric cars and hybrids (with the Original Market Value capped at €50,000). In addition to that, €9m will be spent on greenways and urban cycling projects, €8m will go to maintaining grants for Electric Vehicle purchases and €3 million for Electric Vehicle infrastructure.
Personal income tax
An average taxpayer will not see any changes to their take-home pay but parents will appreciate an increased age limit for free medical services for children. This means free GP visits for under 8's and a phased provision of free dental care for children under 6.
Self employed will be happy to note that the Earned Income Credit was increased from €1,350 to €1,500.
Other things to note
- Legislation loopholes were patched in order to prevent certain corporations from underpaying tax
- Microbrewery relief increased production ceiling from 40,000hl to 50,000hl
- 50c increase on pack of cigarettes
- Stamp duty increase on non-residential property from 6% to 7.5%
- Funding for 700 new Gardaí
- Funding for 150 new teaching posts
- Funding for 400 additional teaching posts for kids with special needs
- Funding for 1,000 Special Needs Assistants
Balancing the budget is hard. The Irish government decided to prioritise preparations for the No-Deal Brexit eventuality and this seems to be the right call. We have to wait to see how the Brexit saga unravels but let’s hope that the worst case scenarios never materialise and that the funds allocated for Brexit measures can later be used to fund projects that affect the average person more directly. We would welcome, for instance, further income tax cuts and investments in public transport infrastructure. We are also eager to see better suggestions on how to tackle the housing crisis.
For more information visit the official Budget 2020 website.