Budget 2017 has not thrown up many surprises, and certainly did not offer anything particularly ground-breaking in terms of measures to be introduced. As the economy is relatively steady at present, changes have been moderate but nonetheless significant for our industry and the economy overall.
With Foreign Direct Investment (FDI) being all the more relevant, given the impending Brexit, perhaps one of the greatest expectations of this Budget was that the government would implement measures that would aim to somewhat mitigate its negative effects. The reaffirmation of the existing corporation tax rate is certainly beneficial from an FDI perspective. Our favourable tax regime continues to attract multinational players into Ireland, and it is hoped that many of the multinationals exiting the UK as a result of Brexit will seek to establish European headquarters or presences here instead. Interestingly, in the update of Ireland’s International Tax Strategy, which was released alongside this Budget, the government is standing firm in its stance against the harmonisation of corporation tax rates, and in keeping Ireland’s interests to the fore in any assessments of related proposals. As a country, we rely heavily on significant FDI for our continued success, and to this end, additional measures which are intrinsically all linked, are being introduced as an attempt to improve our competitiveness and attractiveness as an FDI destination. These initiatives, such as improved infrastructure, with €319m to be spent on the road networks, and moves to ensure that we can provide a highly-skilled workforce are most welcome.
With the economic downturn of 2008 having such a devastating impact on the construction industry in particular, the resulting decrease in both the number of third level students electing to study a related course and the number of graduates choosing to remain in Ireland at the time has led to a profound shortage in terms of relevant industry skills in Ireland. It is crucial that we now prioritise attracting the right calibre of professionals to Ireland, in order to satisfy the ever-widening skills gap, not just in our industry, but in general. In essence, the attractiveness of Ireland as a place to live and work appears to have been a key priority in this Budget, with education, housing and personal taxation being specifically addressed.
Firstly, the initiatives surrounding increased funding for third level education are earmarked to address this skills gap at a grassroots level. Furthermore, a number of personal tax initiatives have been introduced in Budget 2017, such as a reduction in the lower rates of the Universal Social Charge (USC) rate, and the introduction of the Single Affordable Childcare Scheme to assist those using TUSLA-registered childcare providers from September 2017. However, it is fair to say that Ireland continues to fall below par in terms of marginal tax rates at the lower end of the spectrum and special relief programs utilised in other countries (although the extension of the Special Assignee Relief Programme (SARP) is a positive move). All in all, it is fair to assert that the personal tax initiatives, while a positive move in the right direction, do not go far enough in terms of scope, beyond the lower end of the income spectrum.
In addition, much-needed measures to tackle the shortage of residential properties should, in theory, attract a skilled workforce to Ireland. However, we must bear in mind that overemphasising initiatives for the demand-side is erroneous, if they are not matched by similarly significant measures on the supply side to stimulate the construction industry. The recovery of the property market has, of course, been imperative for the recovery of the construction industry, but overemphasis on one side will simply exacerbate the shortage and cause asymmetries in the market. The announced measures include the extension of the Home Renovation Incentive and the introduction of the Help-to-Buy Scheme (whereby from 19 July 2016, first time buyers of new homes will receive an income tax rebate relating to the previous four years).
To conclude, Budget 2017 is most certainly a substantial step in the right direction however the industry needs additional initiatives that will continue to support and stimulate our recovering economy, and it is our hope that Budget 2018 will build upon progress made in this Budget.