Budget 2013: Main measures

By Eoin Fahy, Wednesday, 5th December 2012 | 0 comments
See below for a list of the principal measures in the Budget, or click here for a commentary on the overall Budget.

Overall Budgetary Position:

  • The main domestic measure of the budget deficit, the Exchequer Borrowing Requirement, will be €15.4bn in 2013, down from an estimated €16bn this year.  This still represents a frighteningly large 36% of all government revenues.  If no austerity measures were introduced in the Budget, the deficit would have risen to €17.8bn next year.
  • As a percentage of GDP, the deficit (using the EU measure) will be 7.5%, down from an estimated 8.2% this year.  Without the measures in this budget, the deficit would have risen to 8.9% next year.
  • Total revenue will rise by 3.6% to €42.3bn
  • Total spending will rise by1.8to €57.7bn, of which €49.9bn will be for day-to-day spending and €8.1bn will be for capital spending.

Taxation:

  • The weekly PRSI allowance has been abolished.  Until now the first €107 of income was exempt from PRSI.  This measure will cost each earner about €250 per year.
  • Tax relief on pensions is being restricted.  From January 1st 2014, tax relief will only be available for pensions funds which "deliver income of up to €60,000 per annum".  Consultations will be held to work out the details of this new restriction. Tax relief will continue at the marginal rate, subject to the €60,000 restriction.  The pension levy is to be scrapped after 2014, as previously promised. 
  • Redundancy payments and ex-gratia pension lump sums will no longer be eligible for "top slicing relief" if they are exceed €200,000.
  • For the first time, withdrawals from pension scheme AVCs will be allowed before retirement, although they will be taxed at the marginal rate of tax.  The max withdrawal will be 30% of the fund.  It will be allowed for three years only.
  • Excise duty on cigarettes has been raised by ten cents.  
  • Excise duty on beer has been raised by ten cents per pint, on whiskey by ten cents per measure, and on wine has been raised by one euro per bottle, from today.
  • Excise duty on petrol and diesel will remain unchanged, and a rebate scheme has been introduced for diesel duty paid by hauliers.
  • A number of minor measures have been announced to aid the SME sector, including a higher R&D tax credit, a higher cash receipts basis threshold for VAT, extra funds from the National Pension Reserve Fund for the sector, and other miscellaneous measures. 
  • Real Estate Investment Trusts (REITs) will be allowed under new legislation, which is expected to make Irish commercial property more attractive to overseas investors.
  • As expected, a new Local Property Tax will be brought in from July 1st, at a rate of 0.18% of the value of the property up to €1m, and 0.25% above that level.  To help taxpayers, the Revenue Commissions will provide "valuation guidance" to which owners can refer.  The initial valuation will remain unchanged until 2016.  There will be a "banding" system, with €50,000 increments, and the tax payable will be set at the mid point of that band.  Local authorities can raise or lower the tax by up to 15% from the centrally-set government rate, but only from 2015 onwards.  The Household Charge will be scrapped. The tax can be paid at source from salary or certain State payments, as well  as in other ways.  The average payment will be €157 in 2013 as the tax will only be payable for half the year, it would double in 2014.  Any arrears in the Household Charge will be collected via the new property tax system.
  • New homes bought this year will be exempt from property tax for three years, as will any homes bought by first time buyers.
  • Film tax relief will be extended to 2020, though it will change to a tax credit basis in 2016.
  • Maternity benefit will be taxable for the first time.
  • Carbon tax will be applied to solid fuels for the first time.
  • PRSI will be applied to various sources of unearned income such as rental and investment income from 2014, though for some taxpayers this will take effect in 2013.
  • The DIRT tax rate is to rise from 30% to 33%, as is the rate of Capital Gains tax and Capital Acquisitions Tax.

Spending

  • Total spending cuts of €2bn were announced.
  • Child benefit has been cut from €140 per month to €130 per month 
  • Unemployment benefit (non-means-tested) will now be paid for only nine months, not twelve months as previously.
  • Other basic rates of social welfare will remain unchanged.
  • Some reductions will be made in the "household benefits" package for the elderly, though no details were announced.
  • Prescription charges will be trebled for medical card holders.
  • The pupil-teacher ratio will rise by two for fee-paying schools.
  • Public service staff numbers will be cut to  about 287,000 next year, down from 320,000 at the peak. 

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