The Irish Minister for Finance made his budget speech to the Irish Parliament on Wednesday, 9 December. The measures taken are aimed at regaining Ireland's competitive edge in the international marketplace by achieving over €4 billion in expenditure savings largely through reducing day to day spending on Public Service Pay and Social Welfare.
Key points of interest for the international business community include:
- Reconfirming the Government's commitment to the 12.5% corporate tax rate.
- The Government is awaiting a report from the Innovation Taskforce and intends exploring its recommendations in the context of the upcoming Finance Bill.
- Signposting changes to be introduced in the Finance Bill to strengthen Ireland's competitive edge in the international financial services sector.
- Extending the 3 year corporate and capital tax exemption for start up companies introduced in 2009 to new start ups in 2010.
- Reducing VAT from 21.5% to 21%.
Ireland's 12.5% corporate tax rate has been at the centre of Ireland's inward investment strategy for many years now and remains key. The Minister indicated the 12.5% rate has become an international 'brand', known the world over. It is recognised by the Government as a powerful expression of Ireland's pro-enterprise ethos and has been reconfirmed to send a clear message to the international business community.
One of the Governments stated objectives in December 2008 was to make Ireland "an innovation and commercial hub of Europe". In the last two years a number of measures have been taken to assist Ireland in becoming an even more attractive jurisdiction for intellectual property investment - introducing a scheme of tax relief on the acquisition of intangible assets (including intellectual property) and enhancing R&D tax credits and facilitating greater flexibility in their utilisation. The Government plans to review the Innovation Taskforce report recommendations, shortly, presumably with a view to making further enhancements to Ireland's attractiveness as a centre for highly mobile intellectual property investment.
The Minister has stated that opportunities exist "for Ireland to become the European hub for the international funds industry" in light of recent European legislative changes. Opportunities exist in the international financial services sector for centralising high value added activity in Ireland as the sector restructures globally after the financial crisis. In light of this the Government intends introducing measures shortly to strengthen Ireland's competitiveness in the sector.
Less positively, the Minister has indicated that Irish domiciled individuals and Irish non-resident nationals will have to pay a domicile levy of €200,000 in any year where their worldwide income exceeds €1m and their Irish located capital exceeds €5m. This levy is to apply regardless of where the individual concerned is tax resident.