In Ireland, the economy has been generating robust tax revenues, but the public should temper their expectations for the budget 2024 announcement on October 10th, 2023. Despite a notable 10% increase in tax collections, bringing the total to nearly €48 billion within the first seven months of the year compared to 2022, the government is unwavering in its commitment to exercising fiscal restraint in spending and tax reductions.

Budget 2024 Overview: A Delicate Balance

Looking at the fiscal landscape, there’s anticipation of a record-breaking budget surplus, amounting to €65 billion over the next four years. This surplus, primarily bolstered by corporate tax receipts, is a testament to Ireland’s economic performance. However, the largesse of this surplus is unlikely to directly reach the pockets of households. The government’s proposed budget package for this year stands at approximately €6.4 billion, with only about €1.1 billion earmarked for tax cuts. This allocation is slightly lower than the €1.13 billion set aside in the previous year, leaving limited room for significant changes to tax policies.

Tax Measures: Navigating Uncertainty

One of the focal points of anticipation is tax measures. While there is an expectation of income tax reductions, the exact extent remains uncertain. Minister for Finance Michael McGrath has hinted at possible changes to the Universal Social Charge (USC) and income tax. The emphasis appears to be on preventing individuals from shifting into higher tax brackets due to wage inflation. Strategies under consideration include widening the standard rate tax band and making adjustments to the USC.

Capital Gains and Acquisitions: Uncertainties in Taxation

The realm of capital gains tax (CGT) and capital acquisitions tax (CAT) is characterized by uncertainties. There’s a desire within the tax expert community for changes in the inheritance tax regime. However, the budget’s constraints cast doubt on the feasibility of such modifications. Concerns also arise regarding the widening net of the Capital Acquisitions Tax (CAT).

Housing: Tax Implications in a Dynamic Market

Housing-related proposals in the budget include aligning the tax treatment of small landlords with trading businesses, which could potentially reduce their taxable income. Additionally, there might be consideration for capital gains tax (CGT) rollover relief, benefitting landlords who reinvest their proceeds in the housing market. Renters, too, are on the radar, with possible enhancements to rent credits, although the impact might be limited. On the homeowners’ front, the reintroduction of mortgage interest relief remains uncertain. However, the extension of the Help to Buy scheme, offering tax rebates to first-time buyers, is likely to continue.

Attracting International Business: Taxation Strategies

To attract international workers and businesses, the government is considering simplifying Benefit-in-Kind (BIK) payments for employee rent, with a focus on those earning less than €50,000.

Cost of Living Measures: Easing Household Burdens

If tax cuts turn out to be minimal, households can anticipate cost of living measures. These could encompass direct support measures to alleviate the burden of rising living costs. Possibilities include the return of electricity credits and double child benefit payments. Furthermore, increases in welfare payments, including the State pension, are expected. Taoiseach Leo Varadkar has pledged to reduce childcare costs, though the extent of this reduction remains uncertain pending the budget’s details.

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