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Irish Budgetary Measures Need Clarification, Says Expert

by Jason Gorringe,, London

16 December 2009

Key measures in last week’s Irish interim budget are too vague and need to be clarified by the Department of Finance, according to a leading Irish tax expert.

Addressing the Munster Society of The Institute of Certified Public Accountants in Ireland (CPA) Budget Briefing in Cork, Frank Brennan, Consultant with Purcell McQuillan Tax Partners, observed that:

"This was always going to be a tough budget and the severity of cuts made is essential for the restoration of public confidence, stabilization of the national finances and a return to international competitiveness."

Brennan continued: "The lack of detail on significant measures such as the proposed pension changes, non-resident charge and the new national solidarity bond, as well as the property tax and new tax regime, means there is now unnecessary uncertainty, which needs to be removed as early as possible."

"The Minister has failed to define what exactly constitutes property, and whether or not assets will be subject to the same treatment as physical properties, such as buildings. This must be clarified in the Finance Bill.”

"The decision to simplify the tax system is to be welcomed, but given the likelihood of, and indeed the need to widen the tax base, which has been announced, clarification is needed on exactly what income will be subject to the new universal social contribution levy."

He went on to state that: "Many businesses are already under severe pressure and any measures which have the potential to add to the cost of doing business in Ireland must be carefully reviewed. For example, the new carbon tax adds to an already increasing cost base and has the potential to negate export-led growth. As recommended by the ESRI, carbon tax in the commercial arena should be 'revenue neutral,' with revenue generated ring-fenced to offset other taxes or reduce costs for individuals or businesses."

"While the decision to reduce the rate of VAT to 21% will help stimulate spending in the economy, it does place an administrative burden on businesses that are now required to revise their pricing structures for the second time in 14 months."

Concluding, Brennan observed that:

"Pension changes are eagerly awaited. While some form of capital, perhaps in the form of a percentage amount together with a minimum exemption of EUR200,000 (USD291,170) may be required, it is unlikely that a tax deduction, which is less than the amount of tax which you would ultimately pay on withdrawal, would make pensions attractive."

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