Bringing back tax relief on rents in next Tuesday’s budget could offer hard-pressed tenants as much as a month’s free rent a year and ease their burden at a time of record rents, one of the big professional services company’s has argued. EY also wants to see a €1,200 tax credit extended to all parents to alleviate the cost of childcare.
On a reintroduction of the rental tax credit, Darragh McCarthy, head of private client services at EY, said: “It would introduce an element of relief to those in the private rented sector.” He said the Government could target the relief to those paying rents over a certain national average.
At its peak, in 2010, the relief was worth €400 a year to a single person under 55,or double that to a married couple. Someone over the age of 55 could claim €800, while widows, widowers and married couples in this age bracket were entitled to € 1,600 a year.
The relief was finally phased out last year, as part of a wider strategy to restrict property-based legacy reliefs, but with the latest figures showing average rent in Dublin reaching €1,600, reintroducing the relief could offer some much needed financial support to struggling tenants.
Relief could also be offered to cash-strapped parents, heavily burdened with childcare costs, by extending the home carer tax credit to all parents. At present, the full €1,200 credit is only available to families where one partner earns €9,600 or less.
“Remove the link with income altogether and give the credit to all families, even those with two incomes,” suggested Mr McCarthy, adding that this would then act as a subsidy towards childcare costs, by cutting families’ tax bills by €1,200 a year. “It would go a large way towards relieving the burden on childcare costs,” he said.
Mr McCarthy also warned that the real burden of tax has risen since 2003, in the absence of indexation.
Unfair burden
Referring to capital gains tax, currently levied at a rate of 33 per cent, Mr McCarthy said the application of indexation relief ensures that the tax is only levied on real, rather than notional, gains. However, as this hasn’t happened since 2003, it has resulted in an “unfair burden” on taxpayers.
“The real burden of tax is higher, because you’re actually taxing inflated gains rather than real gains,” he said, adding, “it’s essentially a stealth form of taxation.”
McCarthy said he would also like to see entrepreneur’s relief ramped up to a level that has become the norm in the UK. In Ireland, for example, entrepreneurs can benefit from a lower rate of capital gains tax when they sell their business, up to the first €1 million.
“But that €1 million threshold is particularly low when compared to the UK, where it’s £10 million,” he said. “The lifetime limit needs to increase to a rate which is more in line with the UK amount.”
