Budget 2020 has arrived. With Brexit imminent, Minister for Finance Paschal Donohoe has delivered a cautious and conservative budget, with the effect of the UK's departure from the European Union still uncertain and the outcome of the withdrawal process unclear.
Facing this uncertainty, Minister Donohoe flagged far in advance that his priority was to safeguard the economic progress that Ireland has made in recent years. He has made good on that promise in terms of the economy, with minimal tax changes, while at the same time ensuring that businesses and sectors most likely impacted by the effects of Brexit will be supported. This was evident both in the form of targeted financial supports for specific sectors and enhancements to key business reliefs, such as R&D, EII and KEEP.
Reassurance for business was necessary, and confidence in the economy was central to the Minister's Budget speech. Support for business was clearly evident throughout and was designed to mitigate the projected macroeconomic fallout of no deal, which, according to the Department of Finance will see a drop in GDP growth (5.5% to 0.7% next year) and employment growth shrinking to 0.8%.
The Minister was also clear in his continued affirmation of Ireland's corporation tax rate and our broader tax regime as an important factor in promoting investment here at a time of growing global uncertainty. There were no surprises that he referenced upcoming changes around transfer pricing reform and the anti-hybrid rules in order to ensure our tax regime is transparent and sustainable.
The message, though, that irrespective of the global economic outlook Ireland is still the place to do business was delivered. It was necessary for business to hear the Minister's support for economic stability and certainty of treatment in an evolving international tax environment.
From a personal tax perspective, changes were minimal. While we saw no changes to the income tax bands, the self-employed tax credit was increased, and the Special Assignee Relief Programme (SARP) and the Foreign Earnings Deduction (FED) were extended to the end of 2022.
What we have seen today is clearly a prudent economic strategy. The structures have been put in place to support the economy should a hard Brexit come to pass. Ireland has worked hard to get where it is today in economic terms. Our journey back into the black has not been easy, and no one wants to see a reverse. But no deal is too much of a reality and Ireland is too exposed by it for Minister Donohoe not to have taken this approach to the nation's financial future in his Budget speech.
“No deal is too much of a reality and Ireland is too exposed by it for Minister Donohoe not to have taken a prudent approach to the nation's economic future.”
© 2020 PwC. All rights reserved. PwC refers to the PwC network or one or more of its member firms or both, each of which is a separate legal entity. Please see pwc.com/structure for further details.