Tánaiste and Minister for Finance
Publication of Finance Bill 2008
Good afternoon ladies and gentlemen. I have invited you here today to outline for you some of the key provisions of Finance Bill 2008 which I will be introducing in Dáil Éireann next Tuesday. The Bill will give effect to or confirm decisions announced in Budget 2008. It also contains a number of important initiatives to support enterprise and advance sustainable development. Finally, it will bring into law a wide range of technical provisions which will address avoidance in relation to certain taxes.
This is the fifth Finance Bill that I have introduced to the House. In the previous Bills I have been able to introduce measures that supported business and that make the tax system fairer and significantly lighten the burden on low and middle income earners. In this Bill I will continue with this approach while also seeking to promote care for our environment through a range of initiatives I announced in the Budget.
Tax credits relating to those in special circumstances – such as lone parents, widowed persons and widowed parents, the elderly and those caring for persons with a disability have increased very significantly in recent Budgets. My recent Budget and this Finance Bill makes further improvements in this regard. Age exemption limits have increased by 85% in the last seven years compared with inflation over the same period of about 27%.
Supporting Enterprise and Innovation
Helping enterprise by reducing administrative burden to make doing business easier should always be part of the annual Finance Bill deliberations. This Bill builds on measures to assist small businesses which I introduced in Budget 2007 and includes:
· a number of business friendly measures including revised preliminary tax payment arrangements for Corporation Tax aimed at small and start-up companies
· an increase in VAT registration thresholds for small business to €37,500 in the case of services and €75,000 in the case of goods
· a revised system for applying VAT to commercial property transactions
· the extension of film relief for another 4 years until the end of 2012 with and increase in the cap on eligible expenditure from €35m to €50m per project
I am enhancing the existing R&D tax credit scheme by extending the current base year of 2003 for a further 4 years to 2013, an increase over the current 6 years. The change will provide an additional incentive for increased expenditure on R&D in future years and help to achieve the targets set out in the Strategy for Science, Technology and Innovation 2006 – 2013.
It will also offer more certainty to industry in relation to the tax credit scheme and also assist in competing for major new foreign direct investment.
I am also introducing a tourism initiative to allow caravan parks and campsites avail of capital allowances at the rate of 4% over 25 years. This measure will help this sector of the tourist market to offer more choice to visitors and encourage more Irish people to holiday at home.
I am including in the Bill, legislation to facilitate the introduction of new Stamp Duty initiative known as e-stamping. E-stamping will allow a full self service on-line process where the user can file, pay and receive an instant stamp without Revenue requiring to see the deed in the majority of cases. It is hoped to introduce the service in the second quarter of 2009.
In response to requests received from the social partners, I am making changes to Employee Share Ownership Plans (ESOPs) and Save-As-You-Earn schemes (SAYE). In relation to the ESOPs, I am relaxing the requirement for a ten year loan period for trustees that are in a position to pay off their loans earlier and in relation to the SAYE schemes, I am increasing the maximum monthly amount that can be saved by employees from €320 to €500.
Advancing Sustainable Development
Practical measures to help protect on our environment are necessary to have a real impact on our environment. I am introducing a new tax initiative for Energy Efficient Equipment. This accelerated capital allowance incentive will allow companies to claim the full cost, in the year of purchase, of specified energy efficient equipment against their taxable income. The purpose is to assist in improving companies cost competitiveness while helping to reduce overall energy demand and help reduce carbon emissions. The incentive is in the nature of a “pump-priming” exercise and is limited to a period of three years. Companies should embrace the economic benefits to themselves of investing in energy-saving equipment. The incentive will come into effect by order when EU State-aid approval is obtained.
As I announced in the Budget, the Finance Bill will provide for the most fundamental reform of the Vehicle Registration System (VRT) since its inception in 1993. It will provide individuals and families with the opportunity to make choices to help the environment and with financial incentives to do so. The VRT system is being revised to take greater account of CO2 emissions, with VRT exemption for series production electric cars and up to €2,500 VRT relief for certain series production hybrid and flexible fuel cars. The Bill will make the Business Expansion Scheme more accessible for recycling companies, and introduce an excise tax on electricity for business use to comply with the EU Energy Tax Directive. The Bill also provides for a reduction in the VAT rate applicable on the certain supplies used for the agricultural production of bio-fuels from 21% to 13.5%.
Provisions aimed at reducing CO2 emissions from vehicles used for business purposes by directly linking the level and availability of capital allowances to CO2 emissions are also included. This will be done by restricting or removing the amount of tax relief available for high CO2 emission vehicles while increasing the relief for certain low CO2 emission vehicles. This should act as an incentive to businesses to purchase or lease lower emission vehicles. The changes will also apply to leasing expenses on business vehicles.
Ensuring a fairer tax system
Our income tax system has been made fairer, friendlier, more progressive and rewards those in jobs. As stated in my Budget, the protection of more vulnerable groups must remain a priority when reviewing the income tax code and various improvements for such groups are made. The Finance Bill also provides for increasing the personal credits and bands to ensure that low income earners are kept out of the standard rate band and average earners are kept out of the higher rate band. It also provides for a further increase in the ceilings up to which first-time buyers can claim mortgage interest relief and for increases in rent relief.
For 2008, it is estimated that the top 1% approximately of income earners (those with income over €200,000) will account for about a quarter of the income tax take relating to 2008. In 1997, the top 1% approximately of income earners accounted for less than 15% of the income tax take for that year.
The most recent data from the OECD relating to 2006 indicates that for a single worker on average earnings
I am also introducing measures to counter tax avoidance in the area of convertible securities and employee benefit trusts as well as a new measure in the area of Revenue Powers to question suspects in Garda custody along the lines of similar arrangements that were put in place in 2007 to assist the Criminal Assets Bureau.
The Finance Bill gives legislative effect to the substantial reform of the stamp duty regime for residential property which I announced in the Budget. The old system of rates and threshold has been replaced by an exemption of €125,000, a 7% rate on the next €875,000 and a 9% rate on any balance. In addition, the Bill contains provisions relaxing the stamp duty claw-back provision for first-time buyers of new residences and from 5 to 2 years, which will facilitate people who may have to move home for personal or work reasons, but wish to maintain their residence.
There are a number of other significant measures that I am including in the Bill and which were not announced in detail at Budget time. These include tax relief in respect of Fishing Decommissioning Scheme payments, to encourage take-up under the new EU-approved decommissioning scheme for the white-fish fleet and the introduction of Capital Gains Tax (CGT) relief on Farm Partnership Dissolution .
The Finance Bill will give effect to last year's Government Decision to change the fiscal terms applying to petroleum exploration and production activities. A new Profit Resource Rent Tax will apply in respect of any new petroleum lease which follows an exploration licence awarded by the Minister for Communications, Energy & Natural Resources after 1 January 2007. Additional taxes of between 5% and 15% will apply depending on the profitability of petroleum fields. These taxes will be in addition to the 25% corporation tax rate which currently applies to profits from the exploitation of our natural resources.
I am looking forward to a constructive debate in the Oireachtas on the Bill and on the major policy issues surrounding the tax system.
The Appendix in the press pack provides further details on the full list of Finance Bill measures and we will be happy to take any questions you may have.
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