Tax measures that support individuals and make Ireland an attractive place to live and work are critical to protect competitiveness, according to the main accountancy bodies in Ireland.

CCAB-I, which represents over 50,000 professional regulated accountants, has published its Budget 2023 submission containing a range of measures to alleviate cost of living pressures and to tackle barriers to recruitment and retention across the Irish economy.

CCAB-I identifies two key areas for budgetary focus: improving housing supply to address the crisis in the housing market, and reforming personal tax allowances to help people as they build careers, homes, and families.

The professional body states that the residential property market is in crisis, with not enough houses to buy or rent in the private sector and not enough houses being built by the state for those who need social housing.

Government sees the private rental market as a source of taxes, and this is not the correct approach in a housing crisis, the submission states.

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Cróna Clohisey (pictured), tax & public policy lead, Chartered Accountants Ireland, commented: “Landlords are an essential feature of a fully functioning residential property market.

“However in general landlords consider it to be no longer economical for them to continue in the market. In the Irish tax system, corporate landlords holding rental property have a more favourable tax treatment, at 25%, whereas individuals face rates of 52% and beyond.

“The 25% rate should be extended to individuals to address some of the inequity. By removing disparities, the tax system could be effectively harnessed to encourage landlords to stay in the market and new entrants to meet the supply shortage.”

The submission to finance minister Paschal Donohoe also proposes:

•     Local property tax should be allowed as a deduction against rental income

•     Wear and tear rates for fixture and fittings should be increased from 12.5% to 25% per annum to facilitate landlords investing in the maintenance of properties

•     Where landlords retrofit a property to improve its energy rating, 100% capital allowances should be offered in the year of work

•     To incentivise loss making landlords to remain in the market, rental losses in a tax year could be used against other income (such as employment income) to reduce tax payable.

The CCAB-I also proposes measures to prevent the extraction of rental properties from the market, reduce the displacement of tenants, and result in more residential properties becoming available to purchase:

•     Make available a relief from CGT on disposal of a rental property, conditional on the property being sold with a tenant in situ and/or a requirement for the property to continue in use as a rental property.

•     Reduce the standard rate of CGT from 33% to 20% to release residential property back into the property market for younger generations.

The CCAB-I also proposes that consideration be given to reforming personal tax allowances so that allowances are ‘frontloaded’ at the outset of a person’s career.

Clohisey explained: “We need to turn our attention to personal tax rates, as they are impacting attraction and retention of talent. Recalibrating personal tax allowances is a long-term project and the biggest obstacle will be overcoming political resistance to change. Nonetheless, personal tax allowance reform should form part of Ireland’s overall policy to retain talent.

“Speaking on behalf of a profession where most are in the early stages of their careers, this could be achieved by increasing allowances available to those under 35 at a time when many are taking the first major life steps such as starting a family or approaching the first rung of the property ladder, while reducing the allowances available to those over 55 for example.”

In addition to reforming personal tax allowances, the CCAB-I supports the proposal to introduce a third rate of income tax.

A worker in Ireland currently begins to pay tax at their marginal rate once they have earned €36,800 which is below the average industrial wage. A third rate would make the tax system more equitable provided that the entry levels to each band of tax are appropriate, the accountancy body suggests.

Other measures proposed by the CCAB-I include

•     Leave Employer’s PRSI unchanged to remove barriers to employment creation.

•     Overhaul and simplify the R&D credit to make it more accessible to SMEs.

•     Reform the discriminative tax treatment of service companies if Ireland is serious about encouraging the prosperity of indigenous businesses.

•     Avoid any measures which diminish the already modest capital tax reliefs available to Irish entrepreneurs.

•     To encourage FDI and competitiveness, Section 110 companies should be allowed to deduct withholding taxes suffered on the receipt of distributions or interest received.

•     Pension auto-enrolment incentives should not disturb established tax reliefs for pension contributions.

•     A more flexible Tax-Saver Commuter ticket should be introduced to match the hybrid working model that has emerged for certain workers.

The Consultative Committee of Accountancy Bodies-Ireland is the representative committee for the main accountancy bodies in Ireland - Chartered Accountants Ireland, the Association of Chartered Certified Accountants, the Institute of Certified Public Accountants in Ireland, and the Chartered Institute of Management Accountants.