National Recovery Plan, 2011 – 2014

24 November 2010

Today the government published its National Recovery Four Year Plan, designed to bring the public finances back into order and attempt to support economic development. This is a blue print for the fiscal policies of the government along with economic areas and strategic policies to be adopted to drive the economy forward.

From a tax point of view, the following highlights should be noted:

Income Tax
• With a view to grossing an additional €1.9 billion in revenue, 65% of the overall adjustment will be delivered in 2011.
• Universal social service charge (the combining of the different levies and PRSI charges) first mentioned in Budget 2010 will be implemented in Budget 2011.
• Employer’s PRSI Exemption Scheme to be extended until the end of 2011.
• Pension contribution reform to include eliminating PRSI and Health Levy relief, reducing the personal contribution cap from €150,000 to €115,000 and phasing in of income tax relief on pension contributions limited to the standard rate from 2014.

Property Site Value Tax
• Interim fixed “household charge” of €100 per annum in 2012
• Full value-based addition to be introduced in 2013 (average charge estimated at €200 per annum).

Carbon Tax
• Price of Carbon to be doubled over four years from €15 to €30 per tonne.

Capital Taxes
• Structures and thresholds of capital gains tax and capital acquisitions tax to be reformed, taking account of the falling market values of assets and different types of asset categories.

VAT
• Standard rate of VAT to be 22% from 2013, and 23% from 2014.

Corporation Tax
• No change to the 12.5% rate.

As regards a strategy for improving competitive, growth and employment, the main talking point is the reduction in the minimum wage by €1 to €7.65.

Further details on all aspects of the government’s National Recovery Plan are available on the government website here.