Paschal Donohoe has presented a measured Budget with a clear eye on balancing the books and paving the way for Ireland's future.
With the economy continuing to perform well, the clear goal of the 2018 Budget was to maintain a positive outlook while creating a roadmap for the years ahead.
The Minister said that this Budget was building on Ireland’s progress in a way not thought possible only a few years ago, as well as outlining a national response to new risks and opportunities beyond our control.
One surprise was that the initially expected €350 million of ‘fiscal space’ ended up being €1.2 billion.
This is the result of a number of new revenue generating measures announced, including an increase in the rate of commercial stamp duty from 2% to 6% and increased levies on cigarettes.
The Minister was given the confidence to create more space for spending as a result of the latest economic forecasts, which show the economy performing more strongly in the coming years than was initially predicted.
With the majority of this year’s funds already assigned to measures announced last year, including housing and public service pay agreements, the increased fiscal funds have largely been spent as expected.
If paving the way for Ireland’s future was the goal of the 2018 Budget, then the Minister has started down the road.
The key measures announced by the Minister to relieve pressure on middle income earners include a reduction in the rates of USC and the threshold for the higher rate of income tax increasing by €750 to €34,550. He also announced plans to make housing more accessible for all of Ireland's residents, with a significant increase in state expenditure on housing.
By announcing a consultation process on the merging of PRSI and USC into a single social insurance payment, a signal has been sent that Government knows it must ensure Ireland is an attractive location for key international talent and global businesses to relocate here after Brexit.
The measures announced across the residential rental and development sector show the Government has recognised the need for it to play a more active role in trying to stimulate housing supply.
The Minister also underlined the findings of the Coffey Report and stated that Ireland's 12.5% corporate tax rate would remain unchanged. It is the cornerstone of Ireland's standing as an FDI location and the Minister's endorsement of the sustainability and transparency of our tax code sends a strong message to the international marketplace.
In the face of global competition and tax reform, it is essential for Ireland to remain an attractive and stable investment location and the 2018 Budget acknowledged the realities of Brexit and BEPS and what they mean for Irish business.
Brexit is a significant consideration for many Irish businesses and some are already feeling the impact, particularly around fluctuations in the value of Sterling against the Euro. The 2018 Budget should provide a degree of reassurance to these businesses. The Minister announced the creation of a Brexit loan scheme of up to €300m which would be available to SMEs including food businesses to mitigate their exposure to the impact of Brexit and assist with their short term working capital needs.
These measures signal that the Government is conscious of the challenges being faced and the need to help businesses grow into the future. Ireland must take responsibility for shaping its own destiny in a post-Brexit world and the establishment of platforms for the continued competitiveness of indigenous businesses is a step in the right direction.
There is also an onus on businesses to take responsibility for their own futures. With the word ‘consultation’ repeated throughout the 2018 Budget, organisations across all sectors need to proactively engage over the coming months with the Government so as to help shape Ireland's economic policies in the years ahead.
This is particularly relevant with regard to the proposals of the Coffey Report including EU Anti-Tax Avoidance Directives, Transfer Pricing and Controlled Foreign Corporation rules.
The 2018 Budget is clearly intended to be the foundation of a new and fairer Ireland with opportunities for both individuals and business in the face of numerous challenges.
Some may say the Minister has not gone far enough in terms of the changes he has made but, if paving the way forward was the goal, he has started down the road, illustrating confidence in where Ireland can go as a nation. We will see in next year's Budget how far the road will travel.
Organisations across all sectors need to now proactively engage and help shape Ireland's economic policies in the years ahead.