A new 30 per cent middle rate of income tax should be introduced to ease the burden on workers and a review should be undertaken of the tax treatment of share-based remuneration to help companies in “attracting and retaining talent”, professional services firm Deloitte has told the Government in its pre-budget submission.
“The marginal rate of tax should be reduced from its current level of 52 per cent and the entry point to the higher rate of tax should be significantly increased,” said the firm.
At present, a marginal tax rate of 48.5 per cent applies on income above €36,800, rising to 52 per cent on earnings above €70,044.
It has also called for “enhancements” to the Special Assignee Relief Programme for executives who are relocated to work in the Republic by their employers and who are earning €75,000 or more annually.
The Big Four firm, which is led by Harry Goddard, has also suggested measures to deal with the cost-of-living crisis. These include reintroduction of refuse and service charge reliefs, which would give a tax credit of about €80 per year, in addition to the introduction of a “flexi tax-saver” commuter transport ticket for hybrid workers to “support them” in their return to the workplace.
In addition, it suggests “aligning” tax credits, bands and flat-rate allowances with inflation in the medium term to reflect the recent cost of living increases.
In terms of supporting businesses, Deloitte has suggested a simplification of the Irish corporate tax code, particularly the relief for interest expense on debt funding and enhancements to our research and development regime. In addition, it has suggested a 20 per cent rate of tax on certain dividends to entrepreneurs to “encourage growth in businesses”.
“Tapering relief to reduce the rate of CGT for entrepreneurs who stay in businesses with a view to scaling their operations would be welcome. Rollover relief for persons who exit the business earlier but ultimately reinvest a portion of the proceeds would be a welcome medium-term action from our perspective,” said Deloitte.
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On climate change, Deloitte has recommended the introduction of a zero-rating scheme for VAT purposes for renewable energy projects to “ease the cash flow burden on energy developers”.
“Incentives on green spending should also be considered, either by way of super deductions or capital allowances on ‘green’ expenditures and would align Irish tax policy with competitor jurisdictions such as the Netherlands,” the firm added.
On property, Deloitte suggests an extension to the stamp duty relief provided to property developers for developing sites subject to certain conditions. The relief is due to expire in December. And it said the reintroduction of mortgage interest relief, alongside a rent tax credit, would “provide a measure of relief to homeowners and renters alike”.
Speaking about the uncertain global tax and economic landscape, head of tax at Deloitte Lorraine Griffin said: “While all eyes will be on the immediate changes Budget 2023 will bring for individuals and companies, an enhanced focus must be placed on measures that will provide for sustainable growth in the medium to long term.”
