Why Budget25 was good — but not great

Wed, 02 Oct, 2024 - 08:00

It was a budget with something for everyone in the audience but no showstopping content, particularly for small and medium-sized businesses.

While much had been made of the €14 billion Apple tax windfall, and there is enormous interest in how it will be spent, details were scant.

Finance Minister Jack Chambers’ Budget speech did acknowledge the fact that Ireland’s public funds are heavily reliant on corporation tax, “much of which is ‘windfall’ in nature and not linked to our domestic economy”.

That’s why measures designed to strengthen the SME sector are so important.

Currently, one of the biggest challenges SMEs face is recruiting and retaining staff. It’s an issue we hear daily, at every skills level, and it risks stymying growth.

While there were no direct measures to encourage talented people to come to Ireland, nor encourage those already here to stay, Budget 2025 changes to income tax will help in both cases.

The same goes for increased child benefit, energy credits, and the cut in Universal Social Charge.

The lifting of the ceiling in relation to the small benefit exemption, which allows employers to make a gift to employees for life events such as weddings, from €1000 to €1500, is welcome too, not least because it provides clarity.

Similarly, the issue of whether having an electric charger for a company car is a ‘benefit in kind’, and therefore subject to taxation (it’s not).

In relation to family businesses, changes to retirement relief rules, already due to come into effect from 1st January, are to be maintained.

However, where there are disposals by the child, or children, above €10 million within 12 years of receiving the asset, a clawback of the relief will apply. That’s a doubling of the current clawback period.

The extension of the Employment Investment Incentive, Start-Up Relief for Entrepreneurs, and the Start-Up Capital Incentive, for a further two years to the end of 2026, is good news.

In addition, the amount an investor can claim relief on under the Employment Investment Incentive Scheme (EII) has doubled, from €500,000 to €1 million, while increased tax relief available under the Start-Up Relief for Entrepreneurs (SURE) rises from €700,000 to €980,000.

It’s worth noting however that in 2022 there were just 3,195 EII investors. The relatively small uptake of the scheme may be attributable to an overly cumbersome process, something the Budget has not addressed.

The uptake of SCI and SURE is even more modest and in truth one wonders how many people actually qualify for relief of up to €980,000, on the basis of PAYE income tax paid over the previous seven years.

The hospitality sector will be hugely disappointed that the 9 per cent VAT rate wasn’t reintroduced. Its main hope now is that budgetary measures to reduce the cost of living will feed through to higher consumer spending.

Employers in all sectors were looking for a concrete impact on housing. While the extension of the Help to Buy scheme is welcome, what is really required is greater supply. Further measures to remedy dereliction, an issue particularly visible in Cork, would have been welcomed too.

While it is good that those earning less than €20,000 will stay outside the tax net, that won’t help businesses that are employing highly skilled and professional people. Neither will it have a bearing on such individuals who might be thinking about moving back here. At a time of full employment, that matters.

It is definitely a feelgood budget, but in the end it has wrought few significant changes. In the run-up to Budget Day, we heard talk of an ‘era-defining budget’, while there were certainly plenty of positives, it was not that.