Self-employed taxpayers are among the main winners from Budget 2017, with a combination of an increased tax credit and cuts in USC rates delivering gains to many of around 2 per cent in take-home pay.
The Minister for Finance, Michael Noonan, increased the earned income tax credit by €400 to €950 and while the rise was less than expected it was still enough to leave the self-employed as among the bigger net gainers from the Budget tax measures. Like their PAYE counterparts, they also benefited from the USC cuts.
A married couple on one income from a self-employed person earning €55,000 will gain €778, or €15 a week. A couple in similar circumstances with the earner taxed on PAYE will gain €278 from the tax changes, or €5 a week.
Measures
The USC cuts were the main tax measure in the budget, benefiting anyone earning over €13,000, the income limit at which people are brought into the USC cut. The cuts in the three lower USC rates by 0.5 of a point each will deliver just under €230 to someone earning €45,000 and the maximum cash gain is €353, which benefits anyone earning €70,000 or more.
There were no measures this year to claw back any gains from higher earners. While the three lower USC rates were cut, the entry level of €13,000 on which people become liable for the tax on all their income was left unchanged. The main income tax bands and credits were also left unchanged, meaning taxpayers will pay a bit more tax if they get wage and salary increases.
In an unusual budget package, the only clawback from taxpayers was a 50 cent hike of a pack of cigarettes. Earlier plans to increase the tax on diesel were abandoned and the only other revenue raiser was a promised crack-down on tax evasion and a limited €50 million extra from vulture funds from the closure of a tax loophole.
Concessions
Elsewhere the other major tax concession was directed at first-time housebuyers, with a tax refund of up to €20,000 on those buying newly built homes valued at up to €600,000. Young families will also gain from a new childcare package which will kick in from next September.
The Minister for Finance announced that the budget deficit target for next year would be 0.4 per cent of GDP and that he planned in future to set a target to reduce the debt to GDP ratio below the 60 per cent required by the EU rules to around 45 per cent. Department of Finance briefing papers on the budget pointed out that the revision of the GDP figures had complicated the key budgetary figures.
A separate study by the Department of Finance published along with the budget outlined the threat of Brexit. The Department’s economic forecasts were completed on the basis of a sterling forecast of 85p against the euro, but by yesterday sterling was trading at 91p. The analysis said that the exposed Irish sectors were mainly Irish owned, based in the regions outside Dublin, have low profits levels and account for significant employment.
Caution
In response to the budget, Moody’s, holder of the most cautious view of Ireland’s creditworthiness among leading credit rating agencies since the financial crisis, has said its concerns about the State’s finances remain unchanged after Budget 2017.
"The economy's high level of volatility due to the openness and large presence of multinational corporations implies that Ireland needs larger fiscal and financial buffers to deal with economic shocks than its peers," said Kathrin Muehlbronner, Moody's lead sovereign analyst for Ireland.
