Budget 2012 - Overview

The fifth austerity budget announced today by Minister for Finance, Michael Noonan is the current government’s first budget. This government will target indirect taxes and cuts in government spending to meet the deficit targets agreed with the IMF-EU-ECB troika. Cold comfort will be got from the government sticking to its pledge not to raise income taxes.

A household charge of €100 is being introduced for the first time in 2012. Mortgage interest relief is being increased to 30% for first time buyers who took out their first mortgage between 2004 and 2008. Mortgage interest relief ends for purchases after the end of 2012. The USC exemption limit increases to €10,036. DIRT tax is increased from 27% to 30%.

A property relief surcharge of 5% is being imposed on investors with gross income of over €100,000 and the proposals from last year on Section 23 type reliefs are being abandoned.

A flat rate of 2% stamp duty will be applied to all transactions of land and commercial property from 6 December 2011. No changes were announced for stamp duty on residential property which remains at 1% on the first €1,000,000 and 2% on amounts over €1,000,000.

The Capital Acquisitions Tax threshold is reduced from €332,084 to €250,000 for transfers from parent to child. The CAT rate and CGT rate is increased from 25% to 30%. There will be no CGT on properties sold after seven years if purchased between now and 31 December 2013. Measures were introduced to incentivise timely farm and business transfers from parent to child. Enhanced stock reliefs and carbon reliefs are being introduced.

While it certainly could not be called a pro-business budget, Mr Noonan said there would be no change to Ireland's 12.5 per cent corporation tax rate, and the three-year corporation tax exemption for start-up companies would be maintained. There are enhanced reliefs for R&D, the financial services sector and the renewable energy sector. However the standard rate of Vat increases from 21% to 23% and the reduction in the redundancy rebate for employers from 60% to 15% will have negative effects on the domestic economy and jobs.

Enclosed is a summary of the main provisions which we hope you find useful, and take this opportunity to wish you a Merry Christmas and a Happy New Year.