PART I
TAXATION MEASURES
INCOME TAX CHANGES
The main income tax changes, including associated costs, which will take effect
from 1 January 2003, are as follows:
|
Changes to Income Tax
|
Cost in 2003
€m
|
Full Year Cost
€m
|
Employee Credit increased by €140 to €800
|
125
|
161
|
Age Exemption Limits (single/married)
Increased from €13,000/€26,000 to €15,000/€30,000
|
10
|
17
|
Increase in Mortgage Interest Relief ceiling for First Time Buyers to €4,000/€8,000
per annum and increase in period of relief to 7 years
|
6
|
8
|
Total
|
141
|
186
|
OTHER INCOME TAX
Tax Relief Available to Systematic Short-time Workers
The exemption from income tax for Unemployment Benefit paid to systematic short-time
workers is being extended for a further two years until the end of 2004.
The cost of extending this measure is already taken into account in the forecasts
of tax revenue and is estimated at €1.7 million in a full year.
Reduction in Specified Rate for Preferential Loans
An employee in receipt of a preferential loan is charged income tax on the difference
between the interest actually paid and the amount which would have been payable
at the “specified” rates of interest for home loans and other loans. To reflect
recent reductions in interest rates, the specified rate in respect of home loans
is being reduced from 5% to 4.5% and for loans other than home loans from 12% to
11%. This change will take effect from 1 January 2003.
The cost of this measure is estimated at €0.45 million in 2003 and €0.6 million in
a full year.
Earnings Cap for Employee Contributions to Occupational Pension Schemes
There is a cap of €254,000 per annum on the amount of earnings on which tax relief
may be obtained for contributions by individuals to Retirement Annuity Contracts
(RACs) and Personal Retirement Savings Account (PRSAs). This is a cap on the annual
tax relief but it is not a limit on the funding of pensions. The same cap is being
introduced for employee contributions to occupational pension schemes made on or
after 4 December 2002. The cap will not affect relief in respect of contributions
made before 4 December 2002.
This measure is estimated to yield about €8 million in 2003 and €10 million in a
full year.
CORPORATION TAX
Corporation Tax Reduction in 2003
As already provided for in the 1999 Budget and Finance Act, the standard rate of
corporation tax for trading income is being reduced from 16 per cent to 12.5 per
cent from 1 January 2003.
The full year cost of this measure (€305 million) is already taken into account in
the forecasts of tax revenue.
Pay and File for the Balance of Corporation Tax A
pay and file system will be introduced for corporation tax. This will require a
company to submit the balance of tax within nine months after the end of the accounting
period in question. This will align the corporation tax return filing and final
payment deadlines. The change will apply to a company with an accounting period
ending on or after 1 January 2003. Further details will be contained in the Finance
Bill. The arrangements concerning preliminary corporation tax will remain unchanged.
Following the completion of the transition period for preliminary tax, a company
will have only two contact points with Revenue in relation to payment of tax and
submission of its tax return, namely, the preliminary tax payment date one
month before the end of the accounting period and the pay and file date nine
months after the end of the accounting period.
This measure is estimated to provide a cashflow yield of €16 m in 2003.
CERTAIN CAPITAL ALLOWANCES AND TAX INCENTIVE SCHEMES
Tax Incentive Schemes The table below sets out the
termination dates for a range of tax incentive schemes in the property and film
sectors. It has been decided that the termination date for all of these schemes
is to be set at 31 December 2004. No further time extensions will be made to these
schemes and therefore the termination dates provided represent the final dates for
incurring qualifying expenditure under the schemes except in the case of buildings
in use for third level purposes where the termination date described below represents
the final date for the issue of Ministerial Certificates of approval. Schemes where
some alteration is being made to existing qualifying dates are marked (*) and the
relevant details are provided below:
Scheme
|
Termination date
|
Urban Renewal Scheme*
|
31 December 2004
|
Rural Renewal Scheme
|
31 December 2004
|
Town Renewal Scheme*
|
31 December 2004
|
Living Over the Shop Scheme
|
31 December 2004
|
Multi-storey car parks Scheme
|
31 December 2004
|
Park and Ride Scheme*
|
31 December 2004
|
Student Accommodation Scheme*
|
31 December 2004
|
Buildings used for third level purposes
|
31 December 2004
|
Film Relief Scheme*
|
31 December 2004
|
In relation to the Urban Renewal Scheme, the final date for incurring 15% of the
total project costs is being extended from 31 December 2002 to 30 June 2003. There
is no change to the final date for incurring qualifying expenditure under the scheme.
That date will remain, as set out in the table above, at 31 December 2004.
The termination date for the qualifying period for the Town Renewal Scheme in respect
of tax relief on expenditure on commercial, industrial and residential projects
is being extended by one year from 31 December 2003 to 31 December 2004. While the
extension of the business elements of this scheme will be subject to approval under
EU State aid rules, no such approval is required in relation to the residential
elements of the scheme.
The termination date for the qualifying period for the Park and Ride scheme is being
extended from 30 June 2004 to 31 December 2004.
To align the Student Accommodation Scheme with the other schemes and to conform
with the new calendar tax year, the termination date for the qualifying period for
this scheme is being brought forward from 30 September 2005 to 31 December 2004.
To conform with the new calendar tax year, the termination date for the qualifying
period for investment in film production under section 481 of the Taxes Consolidation
Act 1997 is being moved from 5 April 2005 to 31 December 2004.
Capital Allowances for Hotels The special regime
of capital allowances of 15% per annum over 7 years in respect of hotels and holiday
camps is being terminated on and from 4 December 2002. The general industrial buildings
allowance of 4% per annum over 25 years will apply to expenditure incurred on the
construction or refurbishment of such buildings or structures from that date. Transitional
provisions will apply which will provide for the continued availability of the special
regime in relation to those hotel buildings and holiday camps where binding contracts
are evidenced in writing before 4 December 2002 and the expenditure is incurred
by 31 December 2003.
This measure is estimated to yield €3 million in 2003 and €30 million in a full year
when the phasing out of these allowances is completed.
Capital Allowances for Holiday Cottages The scheme
of capital allowances of 10% per annum over 10 years in respect of holiday cottages
is being terminated on and from 4 December 2002. Transitional provisions will apply
which will provide for the availability of this 10% per annum rate in relation to
those holiday cottages where binding contracts are evidenced in writing before 4
December 2002 and the expenditure is incurred by 31 July 2003.
This measure is estimated to yield €1 million in 2003 and €8 million in a full year
when the phasing out of these allowances is completed.
Capital Allowances for Plant & Machinery and Business Motor Vehicles
The write-off period for the annual wear and tear capital allowances for plant and
machinery is being extended from 5 to 8 years. At present the allowances operate
on a straight line basis over a five year period, i.e. 20% per annum. In future
an allowance of 12.5% per annum on a straight line basis will apply. This measure
will apply to general plant and machinery as well as to business motor vehicles
(excluding taxis and short-term hire vehicles which will retain their 40% per annum
reducing balance arrangement). This measure will apply as respects expenditure incurred
on or after 4 December 2002, except where a binding contract is evidenced in writing
before that date and the expenditure is incurred by 31 January 2003.
This measure is estimated to provide a cash-flow yield to the Exchequer of €20 million
in 2003, €105 million in 2004, €191 million in 2005, €269 million in 2006, €315
million in 2007, €259 million in 2008 and €150 million in 2009.
CAPITAL GAINS TAX
Changes in Payment Dates for Capital Gains Tax
Changes in payment dates are being introduced for capital gains tax for disposals
made on or after 1 January 2003. In relation to capital gains tax due in respect
of disposals made on or before 30 September in a tax year, a preliminary payment
will be required to be made by 31 October in that tax year. As respects capital
gains tax due for disposals made in the period 1 October to 31 December in that
tax year, payment will be required to be made by 31 January in the following tax
year.
This measure is estimated to result in a cash flow yield of €250 million in 2003.
Changes in Certain Capital Gains Tax Reliefs
In respect of future disposals of assets:
- indexation relief will apply only for the period of ownership of the asset up to
31 December 2002; and
(b) in respect of the disposal of assets on or after 4 December 2002, relief for
reinvestment under section 597 (replacement of business and other assets) and section
605 (disposals to an authority possessing compulsory purchase powers) of the Taxes
Consolidation Act, 1997 will not be available.
These changes are estimated to yield about €20 million in 2003 and €100 million in
a full year.
Change to Deferral of Capital Gains Tax through Issue of
Debentures Certain provisions of the capital gains tax legislation allow
a capital gains tax charge on certain disposals to be deferred through the issue
of debentures. This deferral possibility is now being abolished and the relieving
provisions of –
- section 584 (reorganisation or reduction of share capital);
- section 585 (conversion of securities)
- section 586 (company amalgamations by exchange of shares); and
- section 587 (company reconstructions and amalgamations)
of the Taxes Consolidation Act, 1997, will no longer apply –
(a) as respects section 584, in circumstances where shareholders in a company are
allotted debentures, loan stock or similar securities, of the company on or after
4 December 2002;
- as respects section 585, in circumstances where securities are converted at the
option of the holder as an alternative to the redemption of those securities for
cash on or after 4 December 2002;
(c) as respects section 586, in circumstances where a person exchanges shares or
debentures in a company for debentures, loan stock or similar securities of another
company on or after 4 December 2002; and
(d) as respects section 587, in circumstances where the persons concerned hold shares
in a company, and under an arrangement between them and the company they are issued
with debentures, loan stock or similar securities, of another company on or after
4 December 2002,
unless the allotment, conversion, exchange or issue, as the case may be, is effected
on foot of a binding agreement, evidenced in writing before 4 December 2002.
It is not possible to estimate the yield from this measure.
STAMP DUTY
Changes in Stamp Duty Rates and Thresholds for Non-Residential
Property The stamp duty rates and thresholds for non-residential property
are being changed. The maximum rate will now be 9%, the same as for residential
property, but the threshold limits for all of the existing rates are being increased.
The previous and new stamp duty structures for non-residential property are as follows:
|
Previous Thresholds
|
Rate
|
New Thresholds
|
Up to €6,350
|
Exempt
|
Up to €10,000
|
€6,351 - €12,700
|
1%
|
€10,001 - €20,000
|
€12,701 - €19,050
|
2%
|
€20,001 - €30,000
|
€19,051 - €31,750
|
3%
|
€30,001 - €40,000
|
€31,751 - €63,500
|
4%
|
€40,001 - €70,000
|
€63,501 - €76,200
|
5%
|
€70,001 - €80,000
|
Over €76,200
|
6%
|
€80,001 - €100,000
|
Not applicable
|
7%
|
€100,001 - €120,000
|
Not applicable
|
8%
|
€120,001 - €150,000
|
Not applicable
|
9%
|
Over €150,000
|
The new rate structure will apply for conveyances, transfers and leases (in respect
of any premiums payable) of non-residential property executed on or after 4 December
2002. Where the purchaser has a binding contract in place before 4 December 2002,
the new rates and thresholds will not apply where the conveyance, transfer or lease
is executed before 1 March 2003.
This measure is estimated to yield €118.5 million in 2003 and €158 million in a full
year.
Bills of Exchange (including Cheques) and Promissory Notes
The stamp duty rate is being increased from 8 cent to 15 cent per cheque for cheques
supplied by financial institutions to customers on or after 5 December 2002. The
stamp duty rate on Bills of Exchange (excluding cheques) and Promissory Notes is
also being increased from 8 cent to 15 cent per instrument for such Bills of Exchange
and Promissory Notes drawn on or after 1 January 2003.
These measures are estimated to yield €8.3 million in 2003 and €9.2 million in a
full year.
Credit Cards and Charge Cards
The stamp duty rate on credit cards and charge cards is being increased from €19
to €40 per annum. This will apply to accounts, in the case of credit cards, and
to cards, in the case of charge cards, to be included in the appropriate returns
to be sent by a banker/promoter to the Revenue Commissioners on or after 5 December
2002.
This measure is estimated to yield €25.3 million in 2003 and in a full year.
ATM / Laser cards
The stamp duty rate for ATM cards which do not have a Laser function is being increased
from €6.25 to €10 per card per annum. Stamp duty is being introduced for Laser cards.
As respects Laser cards which do not have an ATM function, the rate will be €10
per card per annum. Where cards have a combined ATM and Laser function, the current
rate for this combined card will be increased from €6.25 to €20 per card per annum.
The increased rate for ATM and combined cards, as well as the new charge for Laser
cards, will apply in respect of cards which are valid on or after 5 December 2002
and are included in the appropriate return to be sent by a bank or a building society
to the Revenue Commissioners on or after that date.
This measure is estimated to yield €17.2 million in 2003 and in a full year.
Extension of the Young Trained Farmer Relief for a Further Three Years
The Finance Act 2000 provided for full exemption from stamp duty on the transfer
of land to a young trained farmer for a three year period until 31 December 2002.
This exemption will be extended for a further three year period to 31 December 2005
and this will be provided for in the Finance Bill 2003.
The cost of extending this measure is already taken into account in the forecasts
of tax revenue and is estimated as €12 million in 2003 and €13 million in a full
year.
Specific Contribution to the Exchequer from the Financial Sector
The Government has decided that a specific contribution to the Exchequer is to be
obtained from the financial sector for the 3 year period 2003 to 2005. The contribution
is to be fixed at €100m per annum for each of the 3 years. The required amount for
2003 is to be obtained from each relevant financial company or group by reference
to the amount of the tax payable on deposit interest by it to Revenue in the calendar
year 2001 (excluding any arrears relating to earlier years). While the required
amount will be subject to an upper limit, it is estimated that, for most of the
companies or groups concerned, it will be equal to 50% of the tax payable by them
on deposit interest in 2001. The payment will be in the form of a special stamp
duty which will be due for payment in October 2003. The same arrangements will apply
for 2004 and 2005. The full details of these provisions will be contained in the
2003 Finance Bill.
This measure will yield €100 million per year in 2003, 2004 and 2005.
VALUE ADDED TAX
Increase in the lower VAT rate from 12.5 per cent to 13.5 per cent
The 12.5 per cent rate of VAT will be increased to 13.5 per cent with effect from
1 January 2003. This increase will apply to all the goods and services which are
currently subject to VAT at the reduced rate of 12.5 per cent.
This measure is estimated to yield €187 million in 2003 and €224.5 million in a full
year.
EXCISES
Tobacco Excise
The excise duty on a packet of 20 cigarettes is being increased by 50 cent (including
VAT) with a pro-rata increase on the other tobacco products, with effect from midnight
on 4 December 2002.
This measure is estimated to yield €3 million in 2002 and €138.5 million in 2003.
Mineral Oil Tax - Auto Diesel
The mineral oil tax on auto diesel is being increased by 3 cent per litre (including
VAT) with effect from midnight on 4 December 2002.
This measure is estimated to yield €3 million in 2002 and €52.5 million in 2003.
Alcohol Excise
The excise duty on a standard measure of spirits is being increased by 20 cent (including
VAT) with effect from midnight on 4 December 2002. The duty on spirit-based “alcopops”
is being increased to the full spirit rate. This will mean an increase of approximately
35 cent (including VAT) in tax on a bottle of this product.
These measures are estimated to yield €90 million in 2003.
Vehicle Registration Tax (VRT)
The top two VRT bands of Category A vehicles will be restructured. Up to now cars
from 1401cc to 2000cc were subject to VRT at 25% while cars from 2001cc and over
were subject to VRT at 30%. From 1 January 2003 cars from 1901cc and over will be
taxed at the 30% rate.
This measure is estimated to yield €30 million in 2003.
A refund of 50% of the amount of VRT due at the appropriate cc rate is provided
to purchasers of ‘hybrid’ motor vehicles. This scheme of refund of VRT, which was
due to expire on 31 December 2002, will be extended for a further two years until
31 December 2004.
The cost of continuing this measure is estimated at €0.05 million in a full year.
ANTI-AVOIDANCE MEASURES
Restriction of Reliefs for Certain Passive Investors
Where an individual carries on a trade of electricity generation or supply without
actively participating in the day to day operation of the trade and is effectively
a passive investor, any relief due in relation to the trade in the tax year 2002
or a later year in respect of losses and capital allowances will only be allowed
against income from that trade and not against the other income of the individual.
It is estimated that this anti-avoidance measure will prevent tax leakage of up to
€10 million per year for the next 5 to 8 years.
Capital Gains Tax – Temporary Non-Residence
Certain tax rules, which, at present, allow individuals to avoid a capital gains
tax charge by selling assets during a period of temporary residence abroad, are
being changed. In future, where an Irish domiciled individual –
- ceases to be tax resident in the State for a tax year – the “year of cessation”,
- then, subject to conditions mentioned below, certain assets will be deemed, for
capital gains tax purposes, to be disposed of and reacquired by that individual
on the last day of the tax year immediately preceding the year of cessation.
This disposal and reacquisition will be deemed to occur where –
- the individual again becomes Irish tax resident before the end of a continuous period
consisting of 5 complete tax years commencing with the year of cessation;
- during his or her temporary non-residence, the individual disposes of the assets
concerned, which disposal does not result in an Irish tax charge under other existing
rules; and
- the assets concerned are all or part of a significant interest in a company (whether
in Ireland or abroad). An individual will be regarded as having a significant interest
in a company if he or she –
- owns 5% or more (by value) of the share capital of the company; or
- owns an interest in the company, the value of which exceeds €500,000.
These changes take effect in respect of individuals who, on or after 4 December
2002, cease to be tax resident in the State.
It is not possible to estimate the yield from this measure.
PRSI CHANGES
Employee As from 1 January 2003, the PRSI
contribution ceiling will increase from €38,740 to €40,420.
This increase underpins the 2003 Expenditure Estimates for Public Services.
Application of PAYE & PRSI to Benefits-in-Kind from
1 January 2004
Currently, the income tax due in respect of benefits-in-kind
granted to an employee arising from his or her employment is normally collected
by restricting the credits available in computing PAYE tax on the employee’s pay.
PRSI and the Health Contribution Levy are not applied to benefits-in-kind.
With effect from 1 January 2004, this treatment will change and
- the income tax due will be collected by the employer operating PAYE on the value
of the benefits, and
- PRSI and the Health Contribution Levy will be applied to benefits.
It is intended that this treatment will apply to as wide a range of benefits-in-kind
as possible. As a consequence of the new measure, a simplification of the rules
governing the estimation of certain benefits-in-kind will be required.
The Revenue Commissioners will be consulting the relevant bodies on the issues involved,
including the operational aspects, so as to ensure that employers and pay-roll software
companies will be in a position to implement the new system from 1 January 2004.
There will be no yield from this measure in 2003 but it will yield up to €58 million
in PRSI and Health Levy in 2004 and up to €83 million in a full year. There will
also be an income tax cash flow gain estimated at approximately €8 million in 2004.
PART II
EXPENDITURE MEASURES
Note for Information
The sums set out below should be read in conjunction with the amounts provided in
the Abridged Estimates Volume published on 14 November 2002.
SOCIAL WELFARE
(See also Annex C, where the changes in maximum weekly rates of payment from January
2003 and increases in Child Benefit from April 2003 are shown.)
The total cost of the Social Welfare improvements is €501 million in 2003 and
€530 million in a full year.
Social Welfare Rates
Maximum weekly personal rates for all old age and related pensions will be increased
by €10, with proportionate increases for pensioners on reduced rates, from the first
week of January 2003.
There will be a special increase of an additional €1 in the weekly rate of Widow(er)’s
(Contributory) Pension and Deserted Wife’s Benefit for those aged 66 and over, bringing
the total increase to €11 per week, from January 2003.
There will be an increase of €7 per week in the personal rate for recipients of
Invalidity Pension (aged under 65). There will be a similar increase for recipients
(aged under 66 years) of Widow(er)’s (Contributory) Pension, Deserted Wives Benefit,
Death Benefit Pension and Carer’s Allowance and for all recipients of Carer’s Benefit
and Disablement Benefit, from January 2003.
All other personal rates will be increased by €6 per week, from the first week of
January 2003.
Qualified Adult Allowances (QAAs) will be increased as follows:
- €7.70 per week for contributory pensions where the qualified adult is aged 66 and
over;
- €6.70 per week for Old Age (Non-Contributory) Pensions where the qualified adult
is aged under or over 66 and for contributory pensions where the qualified adult
is aged under 66;
- €5 per week for Invalidity Pension where the qualified adult is under 66;
- €4 per week for all other QAA payments; and
- Proportionate increases will be applied where persons are in receipt of reduced
rate QAA payments.
The above increases will cost €394.5 million in 2003 and in a full year.
Child and Family Income Support
Child Benefit will be increased by €8 per month for each of the first and second
children to €125.60 per month; and by €10 per month for each of the third and subsequent
children to €157.30 per month, effective from April 2003.
These increases will cost €78.62 million in 2003 and €104.83 million in a full year.
Family Income Supplement income thresholds will be increased by €17 per week, from
January 2003.
This measure will cost €5.45 million in 2003 and in a full year.
Child Dependant Allowances (CDAs) will be paid to recipients of short-term schemes
for 27 weeks or more, from October 2003, where their children are in full-time education
up to the age of 22 years, or up to the end of the academic year after the 22nd
birthday.
This measure will cost €0.16 million in 2003 and €0.63 million in a full year.
The rate of Back to School Clothing and Footwear Allowance paid in respect of children
aged 12 years or more will be increased by €30 to €150, from June 2003.
These measures will cost €1.88 million in 2003 and in a full year.
Additional funding for current School Meals Programme.
This measure will cost €2 million in 2003 and in a full year.
Carers
The €191(single) /€382 (couple) weekly income disregards for means assessment for
the Carer’s Allowance Scheme will be increased to €210/€420 respectively, from April
2003.
From June 2003, the Respite Care Grant will be increased by €100 to €735.
The cost of these measures will be €6.51 million in 2003 and €7.84 million in a full
year.
Disabilities
The Hearing Aid Grant, payable under the Medical Appliance Scheme, will increase
by €350 to €700 from January 2003.
The Islander Allowance will be extended to recipients of Invalidity Pension, Disability
Allowance, Unemployability Supplement and Blind Person’s Pension aged under 66,
from April 2003.
These measures will cost €0.98 million in 2003 and €0.99 million in a full year.
Pensioners/Widow(er)s
The pension disregard for Rent Supplement will be increased
by €13 to €23 per week from January 2003.
The 6 weeks after death payment arrangements will be improved
from June 2003.
The cost of these measures will be €1.7 million in 2003 and €1.86 million in a full
year.
Free Schemes and Fuel Allowance
Funding for the Fuel Poverty Initiative will be made available to improve the fuel
efficiency of dwellings occupied by Fuel Allowance recipients.
The Telephone Allowance will be extended to persons, aged 70 or over, residing in
Nursing Homes where they have their own telephone account, with effect from January
2003.
Entitlement to the Free Schemes will be extended to those aged under 70 who are
in receipt of a qualifying payment where his/her spouse or partner is in receipt
of another Social Welfare payment in his/her own right and the total income of the
spouse/partner is less than €203.16 per week, from January 2003.
Funding for the Rural Transport Initiative will be provided.
The cost of these measures will be €3.04 million in 2003 and €3.43 million in a full
year.
Employment and Educational Supports
The assessment of Benefit and Privilege for Unemployment Assistance/Pre Retirement
Allowance will be abolished for persons aged 29 years and over from May 2003.
The upper ceiling for tapered Qualified Adult Allowances arrangements will be increased
from €196.81 to €203.16 from January 2003.
The cost of these measures will be €0.56 million in 2003 and €0.81 million in a full
year.
Other Additional Funding
Additional funding will be made available to the Family Support Agency, the Money
Advice and Budgeting Service (MABS), Comhairle, the Combat Poverty Agency, the Donegal
Integrated Services Project and Emigrant Advice Centres.
Once-off grants will be made available for the MABS Communication and Promotion
Campaign and to the Irish Deaf Society in 2003.
This funding will cost €3.53 million in 2003 and €3.34 million in 2004.
HEALTH AND CHILDREN
Health Allowances
Increases in line with those for social welfare recipients are being implemented
from January 2003.
This will cost €2.8 million in 2003 and in a full year.
CAPITAL EXPENDITURE
Increase in Funding for National Roads Construction
An additional €209 million will be provided for National Roads construction. This
will bring the Department of Transport’s capital allocation for roads to €1.25 billion
in 2003. The roads allocation for 2004 and 2005 will be maintained at this level.
This will cost €209 million in 2003, €153 million in 2004 and €113 million in 2005.
|