Budget 2012 is the first Budget of the new Fine Gael/Labour government.  It has the difficult task of taking €3.8 billion out of the economy in 2012, whilst at the same time supporting the creation of jobs and growing the economy.  This will be achieved through €2.2 billion in cuts in public spending and raising €1.6 billion in extra taxes.  The government has indicated that this is the first budget in a four year path to Ireland’s recovery.

As expected and on a positive note, the 12.5% corporation tax rate remains untouched and the Irish government remain fully committed to the rate.  The well publicised increase in VAT from 21% to 23% will take effect from 1 January 2012.  However, the government have committed to no further increases in VAT during their term.  Some positive business measures include the introduction of a special assignee relief and foreign earnings deduction programme, which should be of assistance to the multi-national and export sector.  The Minister for Finance has also indicated that he intends to introduce measures in the Finance Bill to support the financial services, insurance and aircraft leasing industries.

The SME and Agri/Food sector were not ignored with the continuation of the corporation tax start up exemption and improvements to the R&D regime.  Well flagged changes to capital taxes include an increase in the capital acquisitions tax and capital gains tax rates from 25% to 30%.  The controversial proposed abolition of property tax reliefs by the previous government has been replaced by a new 5% surcharge and the end of unused accelerated capital allowance reliefs after 1 January 2015 in certain cases.

We have focussed in this briefing on the taxation measures introduced and hope that you will find it useful.  Should you have any queries, please do not hesitate to contact us.