Budget 2023 main points: Details of the tax, rent, childcare and cost-of-living measures

Budget 2023 is unique given its ‘budget-within-a-budget’ nature — with €4.1 billion in one-off measures turbocharging a €6.9 billion ordinary package in an effort to insulate voters from the cost of living crisis — along with €300 million from the Covid reserve fund. Here is what is once-off and what’s going to be permanent or longer-lasting, and the economic backdrop.

Economic forecast

Minister for Finance Paschal Donohoe said headline inflation will be 8.5 per cent this year and just over 7 per cent for 2023. Core inflation, which strips out energy impacts, is now expected to be 5.25 per cent this year and just over 4.5 per cent for next. The forecast for modified domestic demand, which measures the domestic economy, was cut to 1.25 per cent for next year.

The unemployment rate is expected to remain at low levels, Mr Donohoe said, despite the headwinds, and the recovery in tax receipts is “broad based” and up by over €10 billion on 2021, he said, including income tax take. The general surplus will be €1 billion, or 0.5 per cent of national income this year, and €6.2 billion or 2.25 per cent for next year. He said much of this was due to excess corporate tax, which could change at short notice — with €20 billion expected under this heading by the end of the year.

He said public debt would stabilise at €225 billion if the trajectory continues, or €44,000 per capita. However, the debt-to-GDP ratio is now projected to decline to 73 per cent by 2025.

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The Minister said corporation tax receipts are not being used for permanent increases in spending. There will be a new metric (GGB Star) to monitor the health of the exchequer receipts when multinational income is excluded.

Michael McGrath said the budget was being delivered against an extraordinary backdrop of challenges. He said the experience of the last three years “demonstrates our resilience as a nation”. He said we have not experienced inflation such as the current level in more than 40 years. “This is a budget for its time, a budget that seeks to respond with unprecedented measures, a breadth of measures and a speed of execution that we have not seen before,” he said.

There is going to be €90.4 billion in public expenditure next year, he said. There will be a contingency fund of €4.5 billion for next year.

Budget 2023: What it means for businesses and taxpayers

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Once-off measures

• Excise reductions on petrol (21 cent per litre), diesel (16 cent) and marked gas oil (5.4 cent), and the VAT rate on electricity and gas have been extended until the end of February. This will cost €163 million.
• The Temporary Business Energy Support Scheme will pay up to €10,000 a month to businesses to cover up to 40 per cent of the increase in their bills. It will compare the average unit price for electricity between 2022 and 2021. If it is more than 50 per cent, the threshold will be passed. It will need approval from the EU commission
• There will be a Ukraine Crisis Enterprise Scheme worth €200 million for exporters and manufacturers
• Every household will get €600 in electricity credits in three payments of €200: the first before Christmas and two in the new year, costing €1.2 billion
• A lump sum of €400 will be paid to fuel allowance recipients before Christmas, costing €149 million
• A double week cost-of-living support payment to social welfare recipients in October, costing €316 million
• The Christmas bonus will also be paid in early December
• €500 for those on Working Family Payment in November, costing €23 million
• Double child benefit payment in November for all children at a cost of €170 million
• €500 for those on the carers’ support grant in November, and on disability allowances, invalidity pension and the blind pension running to €175 million
• €200 for those on Living Alone Allowance before Christmas, costing €46 million
• €1,000 once-off reduction the student contribution this year, coming in at €106 million
• A double monthly payment of Susi maintenance grants, costing €19 million
• A €1,000 increase for postgraduate student grant
• Public transport reduction fare until end of 2023
• €100 million for schools to help with energy costs
• Not-for-profit organisations will get €60 million this year for energy costs, while section 39 agencies like nursing homes and hospices will get €110 million
• There will be temporary funding of €90 million for tourism and the arts to help support the recovery from the Covid pandemic

Permanent/multiyear

• Income tax package of €1.1 billion. The standard rate cut-off point has been put to €40,000. Tax credits for personal employee and earned income credit will increase by €75. The home carer tax credit will increase by €100. These changes will cost €1.2 billion in a full year
• The second USC rate ceiling will increase by €1,625 increased to account for the increase in the minimum wage, costing €77 million in a full year
• The Help-to-Buy scheme has been extended by two years to the end of 2024, costing €83 million
• A tax credit of €500 for 400,000 renters from next year, but people will be able to claim it this year too. It will cost €200 million. For landlords, the tax breaks are comparatively minuscule. The increase in eligible expenditure for pre-letting expenses to €10,000 will cost just €2 million in a full year. This is in place until 2025, at least.
• A vacant homes tax has been introduced. It will be three times a property’s local property tax, on top of the existing rate. Properties occupied for less than 30 days in a 12-month period will be eligible. Budgetary figures suggest just €3 million is expected from this self-assessed charge, suggesting it will be less painful than at first glance.
• A levy on concrete blocks, pouring concrete and other concrete products raising €80 million annually from April 3rd next year at a rate of 10 per cent
• As legislated for, the carbon tax will increase by €7.50 per tonne to €48.50 from October 12th. This will increase petrol and diesel costs by 2c per litre. This will, however, be offset by a reduction in the National Oil Reserves Agency levy of 2c per litre — basically cancelling out any impact at the pump. The carbon tax increases will raise €151 million in a full year.
• Five agricultural tax reliefs will be extended for young trade farmers, farm restructuring and stock reliefs. The term of their extension remains to be seen. There will be a time-limited scheme for accelerated capital allowances for the construction of modern slurry storage facilities. The full year costs of all agricultural breaks is about €27 million.
• Employers can give up to €1,000 in a tax-free payment in voucher form to workers, up from €500, costing €2 million.
• The cost of special exemption orders for late-night venues will be halved to €55
• The social protection package for next year is €1 billion, covering the €12 increase to weekly payments
• The working family payment threshold is up by €40
• Qualified Child Increase is up to €42 and €50 for under- and over-12s
• Top up payments for community employment schemes of €5
• From January 1st, the qualifying income threshold for the fuel allowance will increase to €200 from €120 above the relevant rate of the State Pension, and €500 or €1,000 (couples) for the over 70s
• Domiciliary care allowance will be increased to €330 per month
• The hourly subsidy paid per child to childcare providers under the National Childcare Scheme will almost treble from €0.50 to €1.40, to a maximum of 45 hours. The Government hopes this will bring down the cost to parents by 25 per cent, an average of €1,200 and a maximum of €2,100. It will cost €121 million. There will be €59 million more for core funding to provide more hours and capacity in the sector. The childcare budget will be €1 billion next year, he said, five years ahead of target.
• The student contribution fee will come down by €500 for families earning €65,000 to €100,000 per year
• Susi grants are going up by between 10-14 per cent
• The PhD stipend will be increased
• Hospital inpatient charges are going to be removed for all public patients
• Free GP care will be extended to more than 400,000, including to those on or below the median income, with six- and seven-year-olds to gain access by the end of this year
• Free contraception will be extended to women aged up to 30
• A State-funded IVF scheme will be started
• There will be €443 million for waiting lists
• An increase of €58 million for mental health funding
• €439 million of the Covid fund will go to test and trace, vaccinations and PPE programmes
• Increased funding for special education: there will be 686 new special needs teachers and 1,194 special needs assistants hired
• There will be 370 additional teaching posts funded, bringing the pupil/teacher ratio down to 23:1 in primary school
• Free schoolbooks for all primary school pupils from September of next year benefiting more than 500,000 pupils
• €150 million in extra funding to strengthen the financial position of the higher-education sector
• €337 million in capital funding for energy efficiency
• 4,800 additional apprenticeship places, 11,000 upskilling and reskilling opportunities and 2,000 skillnet places
• There will be another 1,000 gardaí hired, and 430 civilian staff, with 200 recruits entering Templemore every three months in the coming years. €5 million more for Garda overtime.
• 400 new members of the Defence Forces and a €35 million increase in capital funding, partially to support the development of new radar systems
• €177 million more for international development
• Increases in the threshold for eligibility for the working family payment and eligibility criteria for the fuel allowance

Other

• The rainy day fund (rebranded the National Reserve Fund) will get €2 billion this year, and €4 billion next year
• The 9 per cent VAT rate for hospitality is not being extended. It got a brief mention, but only to confirm it will end at the end of February
• Newspaper sales will be zero rated for VAT, as will some period products, defibrillators and nicotine replacement products. The cost of the newspaper VAT measure is €39 million in a full year. Flate rate compensation for farmers is being reduced from 5.5 per cent to 5 per cent, costing €46 million.
• The film corporation tax credit will be extended to December 2028
• Key Employment Engagement Programme will be extended to the end of 2025
• Special Assignee Release Programme to 2025 but there’s a €25,000 increase in qualifying income to €100,000. The Knowledge Development Box will be extended for four years at a cost of €8 million.
• On a windfall tax, Mr Donohoe said it “isn’t fair” that windfall products are happening. He said Ireland aims to be part of the EU wide response but said the Government will bring forward its own response.
• The bank levy, raising €87 million per annum, is being extended for another year
• Cigarettes are going up by 50c from midnight, raising €54 million
• Mr Donohoe signalled a medium-term roadmap for personal taxation reform, a review of REIT and IREF regimes which are targeted at institutional property investors — and Section 110 companies, which have been used to reduce tax bills on Irish property investments