The tourism industry will be disappointed with the increase in VAT to 13.5% and in particular those outside of Dublin where they have only recently got back on their feet and where there is a need for capital investment in the core infrastructure. The more positive news is on the general economic side where the economy continues to grow, with projected growth of 7.5% in 2018 and 4.2% in 2019. Employment has grown by 380,000 between 2011 and 2018 and it is expected that 60,000 extra jobs will be created in 2019. Consumer expenditure is expected to grow by 3.5%, with the consequent flow through benefits to jobs and taxation.
The Government has come in for a lot of criticism on the housing crisis and it is welcome to see the additional funding of €2.3bn on the general housing programme, with €1.25bn being earmarked for social and affordable housing. The new Land Development Agency (LDA) has been established and it remains to be seen how an overall housing strategy develops with so many different entities and stakeholders.
With the Minster close to a balanced budget, this left some room for tax decreases and these have been delivered with cuts in USC, an increase in the standard income tax rate band and targeted tax credit increases.
On the general business front, there has been little done and while some reviews are being carried out of tax incentives, it is disappointing that more progress has not been made on devising a more user friendly EIIS scheme and a share incentive scheme that would assist OMB entities in retaining and incentivising key staff. With greater competition for people extending internationally, coupled with the UK likely to have a freer hand on tax incentives post Brexit, Ireland Inc. needs to ensure that it has a tax system that competes not just solely on our headline corporation tax rate of 12.5%.
With Brexit looming on the horizon, it is positive that some additional resources are being deployed in the form of extra loans of €300m and funding of €110m for support in tackling the political challenges.
Most people will have some small benefits from the tax and USC changes and this allied to the overall strength of the economy, will likely result in a positive perspective on the totality of Budget 2019.