Podcast on 2010 Finance Bill

March 3, 2010

An interesting and entertaining Podcast on the 2010 Finance Bill is now online.

Accountancy Ireland magazine has recently published a special Podcast on the 2010 Finance Bill. The Podcast features a  30-minute discussion of the main points of the Bill by tax experts Liam Lynch, Marie Barr and Brian Keegan.  It is well worth a listen.

The discussion covers such areas as the new domicile levy, the 30% minimum tax rate for high earners, the imposition of VAT on public services and changes to medical expenses relief, the Life Insurance levy, transfer pricing legislation, and the Windfall Tax.

The Podcast can be downloaded here.

Accountancy Ireland is published bimonthly by Chartered Accountants Ireland

No need for Consumers to suffer new VAT hit

February 8, 2010

The Government should act now to ensure that the imposition of VAT on public service charges does not cost consumers a cent.

Last week’s Finance Bill confirmed that council and public body fees for services such as waste collection, parking and road tolls will soon be subject to VAT of 13.5% or 21%.

Refuse charges to rise?

This follows a recent European Court of Justice (ECJ) ruling, which found that the VAT exemption for Irish local authorities gave them an unfair advantage over private sector operators, who provide these services to the public on a commercial basis. The ECJ ruled that this VAT exemption must be removed in order to eliminate this unfair advanage. To this extent, the Government’s hands are tied.

That said, there is a very simple measure that the Government can take in order to protect consumers and households from any additional VAT cost arising from this move.

It should instruct all councils and public bodies to absorb the VAT charge within their existing revenue from these services. It should then calculate the net VAT cost for each council or public body, and refund this cost to them, from the proceeds of the new VAT charge. If these calculations are done correctly, it will not cost the Exchequer a cent.

On the other hand if the Government attempts to use this change as an excuse to extract more tax revenue from consumers, I believe it is doomed to fail.

Take the example of local council operating a refuse collection service. Normally a collection truck will visit each estate once weekly. If charges rise by 13.5%, at least some consumers will switch to private operators instead of paying the higher fee. To maintain their service, the collection truck will still have to visit each estate each week, but now collecting refuse (and revenue) from a dwindling base of customers. Its average cost per collection will increase and its revenue will decrease. Not a good result for the council.

Similarly, look at the M50 toll road, which is managed by the NRA on behalf of the State. If toll rates go up, less cars will use the road. As volumes decrease, so does revenue. Yet the NRA still must maintain the road to the same standard.

In a recession, the key to maximising toll revenue is not to jack up prices (a surefire way to lose revenue) but to increase the volumes of cars on the road. This is why the private-sector operators of the M4 Enfield toll plaza decided recently not to implement a price increase for 2010, even though they are legally entitled to increase tolls annually.

If the Government plays stupid on this one, demand answers from your T.D.

Finance Bill: End of the 1% Levy on Pensions

February 5, 2010

Yesterday’s Finance Bill heralded the scrapping of the 1% levy on pension payments, which came into force last June.  This is a welcome development and highlights the absurdity of the original levy.

I cannot understand why the Minister decided last year to discourage taxpayers from saving for their old age,  especially at a time when we are told we have a serious national pensions deficit.

Retirement fund

It appears from the Finance Bill that the 1% levy on life assurance payments will stay in place, at least for another year. Again, I am at a loss to understand why the Minister deems it fit to impose a tax on people who are prudent enough to put a few euro into a life assurance policy, to protect their family if they happen to die unexpectedly.

Last year’s Finance Bill included both the new 1% life and pensions levy, and also a hike in the insurance levy from 2% to 3%.  Unfortunately the insurance levy is unchanged this year. That said, it might be more than a little optimistic to pray for its demise.

Older readers will recall that the previous 2% levy was introduced as a ‘temporary’ measure in the early 1980s, in order to finance the State rescue of the stricken Allied Irish Bank.

It is ironic that, not only is the levy still in place a generation later, but it is now 50% higher, just as Nama is in the process of bailing out the banks once again! Plus ca change…

The 2010 Finance Bill is unveiled

February 4, 2010

The 2010 Finance Bill has been published earlier this afternoon.  In addition to the measures announced in the Budget, it contains a raft of new provisions, including the following:

  • A new package of reforms to the Capital Acquisitions Tax system,  which are designed “to modernise and simplify the CAT regime, while delivering immediate and significant benefits to taxpayers, their legal advisers and the Revenue Commissioners”.
  • Minister for Finance, Brian Lenihan

  • Measures to facilitate the development in Ireland  of Islamic finance which  is compliant with the principles of Shari’a law.
  • From 1 July 2010, VAT will apply to Public Bodies and local authorities, for waste collection, landfill, and recycling services; off-street parking; toll roads; and leisure facilities).  This follows a 2009 European Court of Justice (ECJ) ruling against Ireland. The changes will not affect education, health, water and passenger transport services.
  • The abolition of  certain Tax Reliefs including tax relief on Service/Refuse charges (from 2012 onwards), relief for Gifts of property to the State and Capital Allowances for childcare facilities.
  • Confirmation that the 80% Windfall Tax will now not apply to the sale of one-off sites below an acre and €250,000.
  • Technical changes to procedures in relation to tax relief for medical expenses. According to the Dept of Finance “he relief is being refocused on expenses incurred by or on the advice of a medical practitioner”.
  • The scrapping of the 1% Levy on pension products “in order not to discourage investment in pensions”.
  • The introduction of transfer pricing legislation to regulate trading between associated companies.
  • Measures to combat the misuse of tax avoidance schemes.

Finance Bill 2010 to be published this Thursday

February 1, 2010

The 2010 Finance Bill is due to be published this Thursday. The Bill will give legal effect to the measures announced in last December’s Budget.

It is also expected to contain a number of additional provisions that were not included in the Budget.

Recent media coverage has indicated that the Finance Bill will include new rules governing the tax treatment of contract workers,  tighter controls over transfer pricing arrangements and increased powers for the Revenue Commissioners in combatting the black economy.

Crackdown on Contract Workers?

January 21, 2010

The Sunday Business Post reported on January 10 last that the forthcoming Finance Bill will include plans to bring thousands of contract employees into the PAYE net for the first time.

The mooted changes are designed to ensure that a contractor who is a de-facto employee cannot avoid PAYE by being paid through their own limited company.

Until the Finance Bill is published in early February, we will not know whether this measure will become a reality. If it does, it is likely to hit both contractors and the companies who hire them.

Its effects would be most serious for IT specialists and other contract professionals and technicians who contract to Irish industry including the multinational sector. This sector has already been badly exposed to the downturn in the world economy and is unlikely to welcome any further increase in their Irish cost base.

If you are a contractor operating through a limited company, or subcontracting work to others in this manner, you should keep a close eye on developments in this area.