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Tax breaks, vat cuts and levies in strategy
May, 11th 2011

THE Government strategy to boost job creation includes plans to cut VAT, increase tax breaks for employers and levy workers pensions.

Minister for Finance Michael Noonan yesterday outlined a set of measures that he said represented the Governments first steps on the road to improving the economys international competitiveness and promoting job creation.

The plan involves tax cuts and incentives. The Government intends paying for these by imposing an annual 0.6 per cent levy on the assets of pension funds in the State for the next four years. Mr Noonan estimated that the charge would raise 470 million a year.

The Minister stressed that the levy would only apply for a relatively short period, and argued that he had to impose the charge on pension fund assets as increasing taxes in other areas would only damage the economy.

The plan includes a pledge to spend an extra 30 million on school building this year.

Of this 20 million will be reallocated from the existing Department of Education and Skills budget, while the Exchequer will provide the remaining 10 million.

In the same vein, the Government intends to earmark 60 million for the repair and restoration of local and regional roads.

Mr Noonan estimated yesterday that around 800km of roads about the country would benefit from this.

In a bid to cut the cost of hiring and employing staff, the Government will halve the lower rate of employers PRSI on jobs that pay up to 356 a week from July 1st. It will leave the existing PRSI incentive scheme in place until the end of the year to facilitate businesses that intend taking advantage of it.

Mr Noonan is also planning to change the research and development (RD) tax-credit scheme. Under this businesses can claim 25 per cent of RD spending against their corporation tax liabilities or receive credit for it.

The Minister said that he would amend the legislation to allow employers to claim for it above or below the line. This will allow businesses to claim for it against a variety of tax charges instead of just against the tax they pay on their profits.

Part of the plan involves a change to the original programme for government commitment to cutting VAT by 1.5 per cent.

Instead the Government intends to cut the rate charged on goods and services relating mainly to the tourism industry to 9 per cent from 13.5 per cent.

The reduction is part of a package aimed at promoting tourism. The new rate will apply to restaurants and catering services; accommodation; admission charges to tourist attractions, entertainment and sports venues; and to maps, programmes, newspapers and hairdressing.

To encourage overseas visitors, the Government will also temporarily drop the air travel tax and is working on a new scheme of discounts on the charges that airports impose on airlines. The VAT and travel tax measures will be reviewed in 2012 to establish if they are increasing job numbers.

The Government also intends to introduce a common visa system with the UK. This means that visitors from outside the EU who have already obtained British visas will not have to apply for a separate visa to enter the Republic.

The change will be designed to boost numbers coming from emerging markets such as China and India, and is also aimed at luring tourists heading for the 2012 Olympics in London to the Republic.

The measures aimed at aiding those who have lost their jobs include a proposal to provide an extra 6,000 places on courses to learn new skills.

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