McCreevy Springs No Tax Surprises In Irish 2004 Budget Speech
by Jason Gorringe, Tax-News.com, London
05 December 2003

Irish Finance Minister Charlie McCreevy resisted the temptation to tinker with the taxation system this week, announcing a ‘steady as she goes’ budget for 2004.

Though McCreevy has decided to raise indirect taxation on certain products, this has largely been restricted to alcohol and tobacco. He did however propose to tighten the laws regarding VAT avoidance.

“I propose to put beyond doubt the VAT law as it applies to the site element in transactions involving the construction of new houses and apartments. This will deal with an unacceptable interpretation of VAT law being propounded by some tax practitioners and will safeguard the revenues of the State in such transactions.”

Meanwhile, the Finance Minister decided not to tinker with rates of direct taxation. “Considerable progress has already been made in reforming our direct tax system in the past six years and in adapting it to the changing needs of our society. Lowering the direct tax burden has in particular produced positive results in our increased ability to create and protect employment,” declared McCreevy.

Other measures announced by the Finance Minister include an increase in the employee tax credit by €240 to €1,040 per annum. “This will continue to ensure that tax is not payable on 90 per cent of the minimum wage and will remove 39,200 taxpayers from the tax net”, he said.

Furthermore, the film industry has welcomed McCreevy’s decision to retain Section 481 tax breaks. "I have reviewed the case made to me by my colleague Mr. John O'Donoghue, the Minister for Arts, Sport and Tourism, and I have decided as a result that film relief will be extended for a further period until the end of 2008, and that the ceiling per film will be increased to €15 million from 2005” he announced.

However, he said that further extensions were conditional on their being “no further abuse of the scheme.”

The only major new tax initiative is the introduction of a Research & Development tax credit and under this proposal up to 20 per cent of R&D expenditure will be permitted to be set against corporation tax in any given tax year. The scheme will be reviewed after five years.

Also, McCreevy has proposed to exempt the disposal of subsidiary companies from capital gains tax and to expand the scope of our double taxation relief provisions for dividend income paid to parent companies in certain cases.

A comprehensive report in our tax shelters series describing tax-effective regimes for film production in a number of key countries is available in the Tax News Reports Shop at http://www.tax-news.com/reportshop