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Budget 2021

Budget 2021

Main provisions

  • Higher rate of VAT will revert to 23% after the 6-month reduction to 21% announced in the July Stimulus expires.
  • VAT rate for the hospitality sector has been cut from 13.5% to 9%.
Corporation Tax
  • Corporation tax will be maintained at 12.5%, though in his speech outlining the Budget, Minister Donohoe said that changes in international tax law which will impact Ireland are inevitable.
  • An amendment to legislation through a financial resolution included in the budget means intangible assets acquired after 13th October 2020 will be fully within the scope of balancing charge rules.
  • The Minister announced that further legislation required to transpose the EU Anti-Tax Avoidance Directive will be introduced next year including the introduction of interest limitation and anti-reverse-hybrid rules.
  • There will be no change in income tax and there will only be slight adjustments to the cut-off points for the 2nd band of the Universal Social Charge as well as for Employers’ Pay-Related Social Insurance to reflect the rise in the minimum wage from €10.10 to €10.20 in 2021.
  • Carbon tax is to be increased from €26 to €33.50 per tonne. This increase will be applied on petrol and diesel from midnight on 14th October, however, the hike will not be applied to home heating oil until May of next year.
  • Carbon tax is set to rise by a further €7.50 each year up to 2029 and by €6.50 in 2030 bringing the total to €100 per tonne in the next decade.
  • The commercial rates waiver has been extended to cover Q4 of 2020.
  • Taxes on packs of 20 cigarettes will increase by 50c. There will be no change to the duties on alcohol.
  • The tax warehousing scheme to include repayments of Temporary Wage Subsidy Scheme funds owed by employers and preliminary tax obligations for the adversely affected self-employed is to be extended.
  • The Earned Income Credit with the PAYE credit will be equalised by raising it by €150 to €1,650.
  • Ireland’s health budget will reach over €22 billion in 2021, the largest in the history of the State.
  • This figure will add nearly €2 billion to core funding from 2020 and an overall increase of €4 billion.
  • In total, the system will allocate €4 billion to Covid-19 response, while the government looks to build capacity in the system.
  • €467 million has been put towards increasing health service capacity to include:

- An increase in ICU beds to 321 by the end of 2020 - up 24 on current levels and up 66 on 2020 plans.

- Acute beds increase by 1,146 by the end of 2021, with sub-acute beds rising by 135.

- An increase in community beds of 1,250, including 600 new rehabilitation beds.

- Five million additional homecare hours.

  • €425 million has been dedicated to delivering enhanced community and social care services.
  • €147 million has been ear-marked for the accelerated implementation of a number of National Strategies, including the National Cancer Strategy, the National Maternity Strategy, the National Trauma Strategy, as well as the roll-out of other social care strategies, including in the area of dementia and palliative care.
  • €100 million in new disability measures including the resumption of day services
  • An Access to Care fund of €318 million has been established to address the complex challenges resulting from the impact of reduced capacity on access to scheduled care.
  • €58 million will be spent on eHealth, €38 million will be put towards mental health and €25 million has been allocated for Healthy Ireland and the National Drugs Strategy.
  • The health budget also foresees the implementation of the Public-Only Consultant contract.
  • The Budget has been framed on the assumption of trade between the UK and EU being governed by WTO rules from 1st January 2021.
  • In aggregate, €350 million has been allocated to Departments to spend on Brexit with €100 million to be spent on Brexit supports specific to 2021.
  • The additional amount provided this year for the Department of Agriculture and Department of Enterprise, Trade and Employment in particular, is aimed at providing for necessary infrastructural and staffing costs to facilitate trade compliance with EU customs obligations and to underpin the protection of national and EU borders.
  • Broader economic shocks caused by Brexit will come under the scope for spending from the newly-announced €3.4 billion Recovery Fund.
  • Committed Covid-19 supports in the Budget amount to €6.4 billion including:

- €3.2 billion in carryover costs from the July Stimulus to cover the Employment Wage Subsidy Scheme and Pandemic Unemployment Payment assuming an unemployment rate of 10.7%.

- €1.9 billion in ongoing Covid-19 health costs, most notably on PPE, testing and contact tracing.

- €400 million for maintaining public transport and €100 million each to the Departments of Agriculture and Enterprise, Trade and Employment for relevant supports.

- The €100 million for the Department of Enterprise, Trade and Employment includes a €30 million top-up to the Covid-19 Products Scheme run by Enterprise Ireland.

  • An additional €2.1 billion has been put aside in contingency for additional spending on Covid-19 matters.
  • The Government also announced a Covid-19 Restrictions Support Scheme which will pay qualifying businesses which have to close or severely limit their activities due to public health restrictions up to €5000 per week whenever their area is subject to level 3 restrictions or above.
  • Broader economic shocks caused by Covid-19 will come under the scope for spending from the newly-announced €3.4 billion Recovery Fund.
Recovery Fund
  • The Government has announced a Recovery Fund of €3.4 billion to stimulate the economy after the economic shocks of Covid-19 and Brexit. Minister Donohoe described the Fund as aimed at stimulating domestic demand and employment and said that it would take the form of targeted supports. The Recovery Fund is deliberately flexible in its design to allow the Government to react quickly in a manner appropriate to the situation.
  • An additional €500 million will be put towards the delivery of new housing under the Budget. This extra funding brings to €2.8 billion the proposed spend on new housing by the government, with an aim to deliver a total of 12,750 new homes to the housing stock. Of those, 9,500 will be built, with 2,900 built directly by local authorities on public lands with 550 homes regenerated along with 800 targeted acquisitions and 2,450 leases.
  • Provision has been made for the Employment Wage Subsidy Scheme to continue in some form until the end of 2021 if the need arises, beyond the current cut-off date of 31st March 2021. Ireland is aiming to secure €2.5 billion from the EU’s SURE mechanism to help cover the cost of the scheme.
  • The minimum wage will be raised from €10.10 to €10.20 in 2021.
  • The State pension age will be retained at 66 despite previous plans to raise it to 67.
Further and Higher Education, Research Innovation and Science
  • Funding for 17,000 apprenticeship places (including those announced in the July Stimulus).
  • Funds for an additional 5,000 additional places on undergraduate courses.
  • A €276 million capital expenditure allocation to support infrastructure investment, to expand student places, upgrade existing infrastructure, modernise apprenticeship provision and progress the digital agenda. It will also support the development of research capabilities in the higher education sector.
  • Fee grants for post-graduate students to increase from €2,000 to €3,500 in September 2021 and the fee income threshold to qualify for grants will rise from €31,500 to €54,240.
  • About 200 more disadvantaged students will benefit from an extra €1.5 million in the 1916 Bursary Fund. which was set up to encourage participation from sections of society that are significantly under-represented in higher education.
  • All the additional third level places created this year will be retained, and an additional 2,700 will also be created to cater for demand in 2021. It also anticipates additional need for SUSI grants with a further €20 million to underpin supports for another 4,000 students.
  • There is also €8 million for the state training and further education agency, Solas, to support community learning among educational disadvantaged groups, while the July Stimulus package will also be boosted to support more training places.
  • A €3,000 incentive for employers to take on apprentices will be extended to the end of June. Already almost 1,000 employers have availed of it.
  • The package also includes €15 million for a higher education minor works scheme.
Green Provision
  • An extra €100m of the money raised through carbon taxes will be allocated to making homes more energy efficient, representing an 82% increase in funding in 2021 compared to this year.The Energy Programme including energy efficiency upgrades in the residential, commercial and public sector is expected to amount to €131 million. The total spent on all retrofitting schemes will be €221.5 million.
  • There will be a new VRT regime from January, based on emissions performance levels as Government confirms that we must transition our CO2-based vehicle registration tax regime to the new more robust Worldwide Harmonised Light Vehicle Test Procedure (WLTP) emissions system from January 2021. VRT reliefs for hybrid and electric vehicles will expire as the Government believes the change to the WLTP will replicate savings on those vehicles for consumers.
  • €1.8 billion funding was announced for sustainable transport, cycling, walking and greenways with €360 million spent on walking and cycling projects under Budget 2021.
  • €27 million has been allocated for tackling climate change through investment in carbon reduction schemes in the area of transport, focused to a large extent on assisting freight and commercial bus operators as well as taxi drivers to invest in electric and low emission vehicles.
  • Approximately €1.3 billion will be spent on expansions and improvements to national, regional and local roads.
  • Works will progress on major Project 2040 road projects including:

- N4 Collooney to Castlebaldwin, Sligo

- N22 Ballyvourney to Macroom Upgrade Scheme

- N5 Westport to Turlough

- N56 Dungloe to Glenties

- M8/N40/N25 Dunkettle Interchange Upgrade

- M50 Enhancing Motorway Operations ie Variable Speed Limits

  • €31.3 million is being provided to support regional airports in 2021, consisting of €21.3 million for the smallest airports – Donegal, Kerry and Ireland West (Knock) under the Regional Airports Programme and €10 million for the regional State airports of Shannon and Cork.
  • €108 million will be allocated in 2021 to maritime transport and safety.