TAX INSTITUTE WELCOMES EXPORTS AND PROPERTY MARKET MOVES - Emma McNamara has been gauging reaction to the two-day Budget at the Irish Tax Institute Budget business breakfast in Dublin city centre this morning. The institute is especially interested in the changes introduced that are intended to a revival in the property market, and incentives for business.
Finance Minster Michael Noonan said yesterday the Government is doing small targeted things to increase employment and grow the economy. Bernard Doherty, President of the Irish Tax Institute, says that while everyone was aware that the country's corporation tax rate of 12.5% was here to stay, it did no harm to confirm that fact in the Dáil yesterday. He welcomes the fact that there was no increase in income tax as it means there will be no increase in the cost of employment. Mr Doherty also welcomed the introduction of a foreign earnings deduction to further support the country's export drive by helping companies seeking to expand into emerging markets. This deduction will apply were an individual spends 60 days a year developing markets for Ireland in the BRICS countries - Brazil, India, Russia, China and South Africa. But he said that if consumer spending patterns change after the increase in the VAT rate from 21% to 23%, then the target set by the Minister for this extra charge will not be meet. However, he says the €1 billion predicted by Mr Noonan from yesterday's package of measures is ''doable''.
Marie Bradley of Bradley Consulting, and formerly of KPMG, says the Finance Minister yesterday announced five key areas of stimulus in the property market. These included the cut in the stamp duty rate for commercial property transfers from 6% to a flat rate of 2%; the introduction of capital gains tax relief; no change in upward only rent legislation and incentives for people to buy their own homes. But she adds that credit availability is still a key problem and yesterday's measures are reliant on credit being made more easily available. Welcoming the changes in capital gains tax relief, she says that many people are still holding cash and it will be interesting to see whether they move back into the property market.
Meanwhile, a survey carried out by the Irish Tax Institute at this morning's business breakfast meeting shows that 63% of those tax specialists surveyed believe the Budget measures will assist export-led growth. Another 36% said the new measures would be of no help.
When asked whether Budget 2012 provided enough certainty to let businesses plan for the next three years, 55% said it did not, while 45% said it did given enough certainty.
76% of tax experts also said that the changes to capital taxes will impact on property transactions, while 24% said it would not.
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HOW THE FOREIGN PRESS REACTED TO BUDGET 2012 - On the day Ireland was meant to be commemorating the 90th anniversary of the State's foundation, the Guardian says that the country's finance minister delivered an austerity budget that reflected the Republic's continued reliance on the EU financial life-line. Michael Noonan outlined details of the €1.6 billion euro in tax rises and other charges needed to drive down the country's huge deficit. The article continues that the overall mood in the Republic is one of stoicism in the face of yet another tax rise and cost cutting budget. In these circumstances it is likely the population will put up little resistance to Angela Merkel's designs for a more fiscally united, financially frugal EU even if it entails yet another loss of the kind of economic sovereignty achieved in 1921.
Sky News said that Ireland's Prime Minister had warned the Budget would be "tough". Brutal might be a better description, the news station stated. On Monday, the government cut public spending by €1.4 billion and on Tuesday, they increased taxes by €1 billion.
The Financial Times says that when Germany's sovereign bond auction came up short two weeks ago, it sent shudders across the euro zone and around the world. But in Ireland, any sense of looming financial apocalypse was curiously muted. As the Republic's 4.6 million people absorb yesterday's seventh round of budget cuts and tax rises since the onset of the debt crisis, Irish policy makers take grim satisfaction at the resilience of their economy. Bundled by its euro partners a year ago into a rescue programme it didn't want, Ireland is now being touted as proof that the severe fiscal austerity imposed by the European Union and International Monetary Fund as a condition of euro zone bail-outs is not necessarily an impediment to economic growth.
The Wall Street Journal wrote that the Irish government completed a painful austerity budget detailing plans to increase taxes and levies on sales, auto, capital and personal savings, saying it is determined to win back economic sovereignty from its international bailout lenders. On the second day of Ireland's budget announcement, Irish Finance Minister Michael Noonan said his €1 billion in revenue measures will bring to €3.8 billion the spending cuts and tax increases ordered for 2012 by the European Union and the International Monetary Fund. Ireland is trying to recover from its worst ever debt crisis when three years ago the country was overwhelmed by the huge cost of rescuing delinquent banks. Just over a year ago it agreed a bailout deal with EU and IMF officials, who set new austerity targets through 2015. Analysts warn Ireland's export-led recovery could slow as the euro crisis deepens, while austerity measures threaten to keep consumer spending depressed and unemployment at a high level, the paper added.
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MORNING BRIEFS - Markets are cautiously optimistic that European leaders would take decisive action to contain the region's debt crisis at a summit later this week. On the currency markets the euro is trading at $1.34 cents and 85.9 pence sterling.
