A plan to make changes to the rent tax credit for tenants in new-build apartments could face stiff opposition as the Government moves towards agreeing its first budget.
It is understood consideration has been given to whether there should be a change – potentially including a higher tax credit – for those living in such flats. It would kick in from the start of March next year.
The date is the same as when reforms to the rent pressure zones designed to usher institutional investment back into apartment construction will take effect.
Among the reforms are the removal of a 2 per cent cap on rent increases in newly built apartments, which would instead be governed by the rate of inflation.
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Changes to the tax credit for those living in these units could potentially shield tenants in these units from the immediate impact of higher rents.
Two sources confirmed such a move has been discussed before the budget, but a senior source cautioned it was “unlikely”. It would also need sign-off from spending ministers and Coalition leaders.
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The wider rent tax credit looks set to be retained, but it is unclear if it will be increased as has been the case in recent years. The Programme for Government commits the Coalition to increasing it “progressively”.
Increasing the credit by €100 for a single person and €200 for a jointly assessed couple would cost €20 million, while doubling it to a level of €2,000 for an individual and €4,000 for a couple would cost €160 million in a full year, according to the Department of Finance.
It comes as Ministers continue pre-budget meetings with Minister for Public Expenditure Jack Chambers and Minister for Finance Paschal Donohoe. Both are emphasising the need to moderate spending, but some in Government have chafed against the budget process this year.
One Coalition source criticised Mr Chambers’s approach, saying line ministers were having to “grovel” for funds for policies which did not count among the once-off measures the Government has pledged to remove.
They said some opening negotiating positions by the Department of Public Expenditure would be politically damaging if imposed.
It is expected that Minister for Social Protection Dara Calleary will seek an additional €12 on core welfare payments in the budget, despite pushback from Mr Chambers’s department over the scale of his initial budget-day requests.
He is also expected to seek increases to the income disregard for the carer’s allowance which at least match those given in last year’s budget.
Minister for the Environment Darragh O’Brien has privately urged Mr Donohoe to extend the reduced rate of VAT applied to energy bills in the budget.
The reduced rate is due to expire at the end of October. The extension is widely expected, with Mr O’Brien said to have emphasised its value to households.
He has also sought the extension of the zero-rating of VAT for contracts to install and supply solar panels, and the policy of exempting from income tax €400 from the sale of microgeneration electricity capacity to the grid.
He has argued that maintaining these two measures would support the roll-out of smaller renewable energy systems designed for homes and businesses.
On Saturday, Mr Donohoe said ensuring “no job losses” will be a key aspect of the budget.
While he declined to be drawn on specific measures, Mr Donohoe said “how we support small businesses” along with the “creation and retention of jobs in Ireland be a “key focus”.
Speaking at the Southeast Technological University (SETU) Carlow, where he was attending a business and enterprise conference, he said: “We are all aware now of the huge changes that have taken place in the global economy. We can no longer assume that the jobs we have we are going to keep.”
The Government had to look at “further measures” that will “deepen the competitiveness of Ireland” and help employers of all sizes to be successful, he continued.
Minister for Enterprise Peter Burke is seeking an expansion of the State’s research and development tax credit. The policy allows companies claim a refund of €30 for every €100 spent on qualifying activities – although it is generally seen as more useful for the foreign direct investment sector.
Mr Burke is seeking either for the credit to be increased by up to 5 per cent or for the definition of what can be counted as innovation for the purposes of claiming the credit to be expanded so more indigenous companies can benefit.
