Finance Bill Published In Ireland

by Jason Gorringe, Tax-News.com, London

06 February 2006

Unveiling his second Finance Bill on Thursday, Ireland's Minister for Finance, Brian Cowen, announced that:

“I view this Bill as a major milestone in this Government’s ongoing programme of economic and social policies aimed at supporting sustained economic growth and promoting improved equality and opportunity for all in society."

"Last October I made clear my commitment to a high standard of public financial management when I launched a series of initiatives aimed at ensuring enhanced efficiency, accountability and transparency in public expenditure. A dynamic, knowledge based Irish economy that aims to be world class in high-value added economic activities needs to be supported by sound fiscal policies that deliver value for money to the taxpayer."

"These principles underpin the decisions I announced on Budget Day in relation to various tax schemes which decisions are given legal effect in the Bill. The internal and external reviews of some two dozen separate tax schemes were aimed at providing analytical evidence on which to base future policy decisions in the area of tax reliefs.”

The Minister observed that the challenge to him as Finance Minister was to bring forward policies that supported growth and employment and were seen by the ordinary taxpayer as fair and equitable.

He gave details of a series of new measures included in the Bill.

“Among these is a special measure to help persons starting or building up a pension by encouraging them to transfer some or all of their SSIA savings into pension savings. This incentive is specially aimed at those on lower incomes”, he revealed.

Measures which were announced on Budget Day which are given effect or confirmed in the Bill included:

• Increases in the personal and PAYE credits to ensure the removal of all those on the minimum wage from the tax net;
• Increases in the standard rate bands to ensure the exclusion of workers on the average industrial wage from the higher tax rate;
• The restriction on the use of Tax Reliefs by High Income Taxpayers;
• The phasing-out of various existing tax schemes and exemptions;
• The ending of the Remittance Basis of Taxation for certain non-domiciled employees;
• The continuation of the stamp duty exemption for young trained farmers for a further 3 years;
• Adjustments to the rules governing “top-hat” pension provisions and Approved Retirement Funds;
• Increases in VAT registration thresholds to help small business; and
• An exemption from excise duties for biofuels and reductions in excise duties on certain home heating oils (Kerosene and LPG).

The new pension initiative aimed at lower income SSIA holders and those with under funded pensions is expected to be of particular interest to the Irish public.

Under the new measure, SSIA holders on the lower end of the income scale will be encouraged to provide themselves with improved retirement arrangements by transferring monies from their SSIA accounts into pensions.

The Finance Minister confirmed that the Government would add EUR1 for every EUR3 transferred from an eligible SSIA account into a Personal Retirement Savings Account (a PRSA), an Additional Voluntary Contribution (an AVC) or a retirement annuity contract, subject to a maximum bonus of EUR2,500.

Additionally, the exit tax to be paid on the SSIA monies so transferred into individuals’ pension accounts will be waived, providing an additional top-up to the person’s pension contribution.

The Minister also highlighted a number of the other significant new measures in the Finance Bill:

Regarding film relief, Mr Cowen announced improvements in the tax relief for film investment aimed at restoring Ireland’s competitive position as a film location. The percentage of expenditure that is eligible for tax relief is being raised to 80% for all films, up from the existing levels of 55% or 66% (depending on the film budget) and the ceiling on qualifying expenditure for any one film is being increased from EUR15 million to EUR35 million.

The Minister also indicated that he was including an enabling provision in the Bill which will allow the Revenue Commissioners (with the consent of the Minister) to introduce regulations governing the automatic reporting to Revenue by financial institutions of interest and other profit payments made to customers as well as certain payments made by Government Departments.

The Minister stated that he was also proposing legislative changes aimed at addressing the use of aggressive tax avoidance schemes principally by way of a surcharge of 10% on undisclosed transactions that are ultimately determined to be tax avoidance transactions. The surcharge will not apply where full details of the transaction are disclosed in a "protective notification" to Revenue within a specified time limit.

“People who are open about their tax planning arrangements will be able to show them to Revenue, and will not be surcharged if the arrangements concerned are determined to be in breach of anti-avoidance rules”, he explained.

The Finance Minister also confirmed that the External and Internal Reviews of Tax Schemes undertaken at his initiative in 2005 are being made available to the public before the commencement of the Second Stage of the Finance Bill on 7 February.

Various provisions of the Bill will also facilitate business, including financial services, in particular, to assist in maintaining Ireland’s competitiveness in these sectors and to create more jobs. There will also be a reduction in stamp duty on dual-use (laser and ATM) bank cards.

Finally Mr Cowen announced that he was closing off a series of abusive tax loopholes in the areas of Film Leasing, Transfer of Irish Assets into a Foreign Company, Capital Gains Tax and VAT Grouping. This is aimed at reassuring taxpayers that all those liable to tax are required to pay their fair share. The Bill will also, as usual, deal with a wide range of technical matters in relation to the tax system.

The full text of the 2006 Finance Bill can be found in the Tax News Resources section.

The full text of the 2006 Finance Bill can be found in the Tax News Resources section.

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