Borrow now to save the economy later – Chartered Accountants Ireland reaction to Budget 2021

Oct 13, 2020

The effectiveness of Budget 2021 will be measured by the billions of euro the government is willing to borrow to invest in the Irish economy. The bigger this investment, the more assured Ireland’s economic future will be post-COVID-19, according to Chartered Accountants Ireland.

Commenting, Brian Keegan, Director of Public Affairs with Chartered Accountants Ireland said

“Since March, the government has invested huge sums by way of wage supports for business, social welfare supports and retraining and reskilling for those whose jobs have disappeared permanently. It is very positive to see that support continue in today’s Budget, both for those still in employment and those who have lost their jobs, at the expense of regressive tax measures.

“Clearly a key consideration in the Budget is the price of money that the government will pay to borrow in the markets, but what we have done so far this year is working.”

Extending supports in Budget ‘21

Measures announced which extend wage supports, reduce the VAT rate from 13.5% to 9% for the hospitality sector, give regular compensation payments to businesses restricted by COVID-19 safety measures and extend the debt warehousing scheme to help the self-employed manage their tax debt give Irish businesses something tangible to rely on and build upon. This certainty is key in a time of turmoil brought on by COVID-19 restrictions and an unknown post-Brexit trading landscape. 

Keegancontinued

“The funds committed for retraining and upskilling the Irish workforce as announced in today’s Budget means that Ireland will be work-ready as soon as the COVID-19 crisis is behind us.

“Key to the success of these supports will be ensuring that recipients do not become entangled and impeded by red tape and excessive bureaucracy. If the bar to entry is too high in terms of time or expertise required, we run the risk of businesses being unable to avail of much needed supports. We saw evidence of this in the operation of the TWSS and we must avoid going down the same route; it’s the last thing that businesses on the brink need.”

Corporation Tax

The Government’s plans to relaunch Ireland’s Corporation Tax Roadmap sends out a clear message to Foreign Direct Investment that Ireland is a committed and active participant in the OECD’s tax reform work. 

Keegan commented

“Corporation tax receipts have proven to be a stalwart revenue source to the Irish exchequer during one of the most sudden economic shocks we have seen. In the face of questions as to the sustainability of this revenue source, in Budget ’21 today, the government is saying that Ireland can continue to reliably depend on these receipts in 2021. 

“Notwithstanding our commitment to the OECD programme of reform, Ireland is also committed to a national policy of being the best location in the world for multinationals to do fair business.”

Missed opportunities to nurture entrepreneurship

With Ireland’s rate of Capital Gains Tax among the highest in the EU, the decision once again this year to not reduce the rate from 33% to a more palatable 25% is a missed opportunity.  A temporary reduced CGT rate would have brought in much needed tax revenue from a pent-up appetite for transactions which must go unsatisfied for now. 

The tax system can be used to encourage private risk-based investment in start-ups. Private investors have cash doing nothing on deposit and all they need is a government initiative to channel much needed investment into start-ups.  Plans for another review of the Employment Investment Incentive Scheme need to deliver real change to drive private investment to support start-ups.