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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.
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