KPMG partner Tom Woods summarises the overall thrust of Budget 2023

Budget 2023 was introduced by the Minister for Finance as a ‘cost of living budget’ with the stated aim of helping individuals, families, and businesses to deal with rising prices. 

The minister also acknowledged the need to strike a balance between assisting citizens with the rising cost of living and ensuring the stability of public finances in the face of potential future economic shocks. To this end, the minister confirmed that €2bn this year, and €4bn in 2023, will be directed into the National Reserve Fund.

In summary, the tax measures announced amounted to €1.1bn of an overall budgetary package of €11bn.

To assist individuals and families deal with inflationary pressures, a number of tax measures were announced, including the following:

• An increase of the standard rate cut off point by €3,200 to €40,000
• An increase in the 2% USC rate band from €21,295 to €22,920
• Increases to personal, employee, earned income and home carer tax credits

A temporary business energy support scheme is to be introduced to assist businesses over the coming months. Eligible businesses will be able to reclaim 40% of the year-on-year increase in their energy bills up to a monthly cap of €10,000 per trade.

In Association with

The minister emphasised the importance of tackling the housing crisis and climate change, which can be seen in a number of the measures announced, including:

• The extension of the Help-to-Buy scheme to the end of 2024
• The introduction of a rental tax credit of €500 per annum
• The enhancement of the pre-letting expenses regime for landlords
• The introduction of a vacant homes tax
• An increase in carbon tax on petrol and diesel of €7.50/tonne to be offset by a reduction in the National Oil Reserves Agency levy
• The introduction of an accelerated capital allowances scheme for farmers for the construction of modern slurry storage facilities

Looking forward, the minister has committed to preparing a medium-term roadmap for personal taxation reform following the findings in the recent report of the Commission on Taxation and Welfare.  

The minister also reaffirmed Ireland’s commitment to the OECD international tax agreement in ensuring the minimum effective rate of tax for companies with revenues of more than €750m is set at 15% and to seriously consider options for a move towards a territorial corporation tax system.

The total budgetary package of €11b was provided against an economic background of inflationary pressures (forecasted at 8.5% for 2022) and slowing domestic growth (forecasted modified domestic demand of just 1.25% for 2023). 

With the focus on cost of living measures, it was broadly expected that there would be a limited number of tax measures to maintain our attractiveness to inward investment and entrepreneurs in the coming year.  It is hoped that these policy goals will attract renewed focus in future budgets.