Budget 2015 - Speech A Cheann Comhairle, When the Government took office in March 2011 we set out a plan to regain control of Ireland’s fiscal and economic policies, to grow THE ECONOMY and to get people back to work. Many people both inside and outside this House believed that we as a Government would fail and opposed each and every step we took along the way. But, A Cheann Comhairle, the Government did not fail. We exited the bailout. The PUBLIC FINANCES are under control. The Irish economy is growing at the fastest rate among developed economies. The rate of jobs creation in Ireland is ONE of the fastest in Europe. We are ahead of our planned fiscal targets and we have managed to achieve this progress with less tax increases and fewer expenditure cuts than envisaged in 2011. We have succeeded in key negotiations over our EU and IMF loans and on the PROMISSORY NOTES. The road we have travelled to get to this point has been very difficult and the Irish people have made major sacrifices, but the policies pursued by this Government have WORKED AND the recovery in the Irish economy is well underway. The recovery has not spread across the country yet and many families have yet to experience it. The Government is fully aware of this fact. For many people, the recovery will only come when they get a job. For some, the recovery will only come when they SEE MORE money in their pockets. For many families, the permanent return of a loved one who has emigrated will mark the end of the crisis and the start of the recovery. Budget 2015 is about securing the recovery, building FOR THE FUTURE and broadening it to families across the country. This Government will not be RETURNING TO THEboom and bust model of the past that has spectacularly and repeatedly failed the Irish people. We must secure a new economy for a new Ireland. Of course, we must CONTINUE to deal with the legacy issues of the economic crisis, and we will. But today is about looking forward. It is about building for the future upon this solid foundation that has been so painstakingly laid. Macro-economic, fiscal and financial framework As a result of the policies pursued by this Government and the sacrifices of the Irish people, the macro-economic and fiscal framework underpinning this year’s Budget is far more favourable than in previous years. The recovery is gaining momentum. While exports are continuing to grow, the recovery is broadening with domestic sources of growth, consumer spending and investment, contributing positively for the FIRST TIME since 2007. We have now had seven consecutive quarters of solid annual employment expansion and we have now seen an increase in employment of over 70,000 people AT WORK since the low-point in early-2012. Unemployment, while still too high at 11.1 per cent, is at its lowest level in five-and-a-half years and has now fallen for 27 months in a row. My Department is forecasting a continuation of this trend and expects unemployment to fall to an average of just above 10per cent NEXT year. It is clear that the measures introduced to support job creation in key sectors of the economy are working. My Department estimates there will be around one million, nine hundred and twenty thousand people in work by the end of this year; this is over 80,000 higher than at the low-point TWO AND A HALF years ago. By the end of 2015, it is anticipated that the increase from the low-point will be around 128,000 and we expect to have two million people AT WORK in 2016. The Government’s strategy to reduce the burden of our debt by improving the terms of our EU/IMF loans and the PROMISSORY NOTE, minimising future borrowing requirements by reducing the deficit and by growing the economy is working. The forecast debt to GDP ratio for end 2014 is under 111per cent . When ACCOUNTis taken of cash balances and other financial assets, the 2014 net debt forecast is just below 91per cent . Furthermore, a debt reducing primary surplus of 0.3per cent of GDP will be achieved this year. However, our debt is still high by comparison to many of our fellow EU members so we need to continue this approach. Not only will this make the debt more sustainable, it will also minimise the cost to the taxpayer of interest paid on the national debt. This is the BACKDROP to today’s Budget. Prudent and responsible budgeting has got us to this point. Prudent and responsible budgeting will be how we will continue. Each year, this Government has set ambitious deficit reduction targets, often inside those required under the Stability and Growth Pact, and each year we have beaten these targets. This approach has been a key factor in restoring market access and in successfully exiting the EU/IMF programme last year. Investor confidence in Ireland has returned and our 10 year sovereign bond yields are down to record lows, trading at 1.72per cent this morning. THE THREE major agencies, Moody’s, S&P and Fitch, all upgraded their rating of our LONG TERM debt during 2014, with two of them moving us into the A grades. That is why I am targeting a deficit of 2.7per cent in Budget 2015, ahead of the required target of 2.9per cent of GDP. I think that it is appropriate to go beyond our requirements under the Stability and Growth Pact in order to build upon the progress made to date. Achieving a deficit below 3per cent does not signal an end to fiscal prudence in Ireland. Exceeding our target in 2015 will underpin solid, steady ECONOMIC GROWTH into the medium term and it is a further step on the way to balancing the budget. Even so, these figures do not fully reflect the progress that we are making as an element of the surplus income due from the Central Bank in 2015 is being used to only reduce the debt. If the entire surplus income was counted for deficit reduction, the forecast deficit would be 2.5per cent NEXT year. This prudent approach further improves our debt sustainability. We are making significant PROGRESS and we are forecasting that our gross debt ratio will drop below 100per cent of GDP in 2018, ahead of the reduction required by the Stability and Growth Pact. Total general government revenue will be €65.2 billion in 2015 and total general government expenditure will be €70.5 billion. Expenditure under the Government Expenditure Ceiling, consisting of gross voted expenditure along with expenditure funded by the Social Insurance Fund and the National Training Fund, will be €53.6 billion. Minister Howlin will set out full DETAILS of his 2015 expenditure allocations and publish the Ministerial Expenditure Ceilings. CORPORATION TAX reform Since coming to office, the Government has provided vital supports to indigenous industry to grow and create jobs, such as the Jobs Initiative for the tourism sector, the tax reform plan for SMEs and measures such as the HOME RENOVATIONIncentive for the construction sector. We have introduced significant reforms and improvements to our corporate tax system, and last year I introduced changes to address ‘Stateless companies’. Today I am publishing a Road Map to secure Ireland’s place as the destination for the best and most successful companies in the world. There are many changes taking place globally in corporate tax. The key role the corporate tax regime plays in attracting investment is recognised by all developed economies and our competitors for foreign DIRECT INVESTMENT are introducing enhancements to their systems to attract investment. For over 60 years, foreign DIRECT INVESTMENT has been a cornerstone of Ireland’s economic development. We have competed for and won major investment into Ireland and Europe from some of the largest and most successful companies in the world. With over one hundred and sixty six thousand people employed in over one thousand one hundred companies, the Irish foreign direct investment sector has real substance. Our competitive corporate tax system plays a key role. Ireland’s corporation tax strategy has three key elements: Rate, Regime and Reputation. I will deal with each issue in turn. The 12.5per cent tax rate remains at the heart of this. The Government has successfully protected the 12.5per cent tax rate in recent years. The 12.5per cent tax rate never has been and never will be up for discussion. The 12.5per cent tax rate is settled policy. It will not change. The Road MAP responds to a changing international environment and ensures that we continue to attract and retain companies of real substance offering real jobs. The Road Map will: • improve Ireland’s R&D regime by fully phasing out the R&D base year from the 1st of January 2015; • enhance Ireland’s existing intangible asset tax provisions to make Ireland an even more attractive location for companies to develop INTELLECTUAL PROPERTY; • improve SARP, THE SPECIAL assignee relief programme; and • increase the resources of the Revenue Commissioners in its role as ‘competent authority’; I am also going to extend: • the three year corporation TAX RELIEF for start-up companies; and • the accelerated capital allowances scheme for ENERGY EFFICIENT equipment for a further three years. Companies now invest as much or more in knowledge-based capital as they do in physical capital such as plant and machinery. Consequently, I intend putting in place a ‘Knowledge Development Box’ along the lines of patent and innovation boxes which have existed for many years in countries that compete with us for foreign DIRECT INVESTMENT. I am launching a public consultation process to gather views on how the Knowledge Development Box should operate and I plan to legislate for it in next year’s Finance Bill or as soon as EU and OECD discussions conclude. My intention is that the Knowledge Development Box will be best in class and at a low competitive and sustainable tax rate. This intellectual property offering will be a key element in attracting future foreign direct investment to Ireland. Aggressive tax planning by multi-national companies has been criticised by Governments across the globe and has damaged the reputation of many countries. Schemes that exploit mismatches in tax legislation are being heavily scrutinised by the OECD and others and through the Base Erosion and Profit Shifting project they will come to an end OVER TIME. The so called “Double Irish” is one of many such schemes. I am abolishing the ability of companies to use the “Double Irish” by changing our residency rules to require all companies registered in Ireland to also be tax resident. This legal change will take effect from the 1st of January 2015 for NEW COMPANIES. For existing companies, there will be provision for a transition period until the end of 2020.
Posted on: Tue, 14 Oct 2014 17:00:26 +0000