Budget 2013 - Overview

The Minister for Finance, Michael Noonan introduced his 2nd budget, the 6th budget in the fiscal adjustment process, and is probably the toughest yet, as to quote the Minister “all the low hanging fruit had been plucked”.

Almost every adult (and child) in the state will be hit by a range of budget measures including property tax, reduction in child benefit, abolition of PRSI exemptions and extending PRSI on other income, cuts in welfare entitlements, increases in excise duties on alcohol and cigarettes, increases in motor tax and VRT, increase in DIRT tax, increase in student registration charges and taxing maternity benefit.

At first glance, the budget would seem to hit low and middle income families the hardest, with the PRSI change, reduction in child benefit and property tax inflicting most of the pain.

While the budget hit individuals hard, most of the provisions introduced for business will be broadly welcomed. The Minister announced a 10 point plan to help small businesses; however it remains to be seen whether these will have any real impact. The removal of the existing 15% rebate of statutory redundancy payments with effect from January 2013 will have a negative impact. Potential redundancy liabilities accumulating in a business are a real concern for employers and could be a disincentive to retaining non core employees on a long term basis. The increase in threshold for the use of the cash receipts basis to account for VAT from €1m to €1.25m is welcome, but not enough.

Capital Gains Tax and Capital Acquisitions Tax rates are increased from 30% to 33%, with CAT thresholds reduced by 10%. To enable farm restructuring, relief from CGT will be available where the proceeds of the sale of farm land are reinvested for the same purpose.

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