Review of Budget 2013 Announcements

So the speculation is over and the announcements have been made. For a round up of all the main announcements made in today’s Budget, read on….

TAXATION MEASURES

INCOME TAX CHANGES

-          Universal Social Charge (USC)

Currently reduced rates of USC apply to the over 70s and full medical card holders. From 1 January 2013 the standard USC rates will apply to both the over 70s and full medical card holders earning more than €60,000 per annum.

-          PRSI

The minimum annual PRSI contribution for the self-employed is increasing from €253 to €500.

The weekly PRSI allowance for PAYE employees is to be removed. Currently the first €127 of weekly pay for a PAYE employee earning more than €18,305 is exempt from PRSI. This relief is to be abolished in a move that will cost PAYE employees earning over €18,305 an extra €264 per annum.

PRSI to be payable on passive income e.g. rental and other investment income.

-          Maternity Benefit

Maternity Benefit is to become a taxable source of income with effect from 1 July 2013.

-          Top Slicing Relief

Top Slicing Relief will no longer be available, from 1 January 2013, on ex-gratia lump sums in respect of termination and severance payments where the non-statutory element is €200,000 or over.

-          Charitable Donations

A number of changes to the administrative regime of tax relief for donations to charities and approved bodies have been announced. One new blended tax rate for relief on charitable donations of 31% to be introduced.

-          Benefit in Kind

The specified interest rate used in calculating benefit in kind on preferential loans (other than home loans) is to increase from 12.5% to 13.5%. However the specified rate of 5% for home loans is to be reduced to 4%.

-          Film Relief

The current film relief scheme is to be extended to 2020. However the scheme will be removed and will move to a tax credit model from 2016.

CORPORATION TAX       

-          3 Year Corporation Tax Exemption

An extension to the 3 year corporation tax exemption for new start-up companies is to occur. The relief is being extended to allow any unused relief arising from insufficient profits during the first 3 years trading to be carried forward for use in future years. However the maximum allowable relief cannot exceed the eligible amount of Employers PRSI in the year claimed.

-          R&D (Research and Development) Tax Credit

The amount of qualifying expenditure which can benefit from the tax credit without reference to the 2003 threshold is being increased from €100,000 to €200,000.

-          Close Company Surcharge

Close Companies are currently exempt from the surcharge where the amount of any undistributed investment income is less than €635. This threshold is being increased to €2,000. The majority of Irish companies are Close Companies. A Close Company is a company that is controlled by five or fewer participators or is controlled by any number of participators who are directors.

VAT

-          VAT rate for the tourism sector

The 9% VAT rate for the tourism (and certain other) industries is to be retained.

-          Threshold for accounting for VAT on a cash receipts basis

Businesses with an annual turnover of €1 million or less are currently eligible to account for VAT on a cash receipts basis. This threshold is to be increased to €1.25 million. Accounting for VAT on a cash receipts basis is a significant cash flow advantage for businesses.

PENSIONS

-          Access to pension fund pre-retirement age

Individuals will be allowed a once-off option to withdraw up to 30% of the value of their AVCs prior to retirement. However any withdrawals will be liable to tax at the individual’s marginal rate. This option will remain in place for three years after the passing of Finance Bill 2013.

-          Changes to maximum tax relief on pension contributions

The government plans to introduce a cap on tax relief for pension contributions into pension funds which will provide annual pension income of more than €60,000.

-          Pension Levy

The annual Pension Levy of 0.6% of pension funds levied to fund the Jobs Initiative is set to end as planned in 2014.

CAPITAL GAINS TAX

The current rate of 30% is to be increased to 33% and will apply to disposals made after 5 December 2012.

Relief to capital gains tax will be available for farm restructuring. This will be available where the proceeds of the sale of a farm are reinvested for the same purpose.

CAPITAL ACQUISITIONS TAX

The current rate of 30% is to be increased to 33% and will apply to gifts and inheritances received after 5 December 2012. The current group tax free thresholds are also being reduced by 10% with effect from the same date.

DIRT (TAX ON SAVINGS)

The rate of DIRT is to be increased from 30% to 33% for savings products which pay interest annually or more frequently. For products which pay interest less frequently than annually the applicable rate will be 36%. These increased rates will apply from 1 January 2013.

LOCAL PROPERTY TAX

The new local property tax will take effect from 1 July 2013. A half-year payment will be charged in 2013.

The tax will be charged at a rate of 0.18% on properties valued at less than €1 million and at a rate of 0.25% will apply to any excess value over €1 million. Importantly these rates will be known as the “central rates” but from 2015 onwards, local authorities will be able to vary the rate of the tax by up to +/- 15%. Therefore different rates will apply depending on the local authority that you live under.

The Household Charge will cease with effect from 1 January 2013 as this local property tax is to replace it. In addition the NPPR (non principal private residence) charge will cease with effect from 1 January 2014. Any unpaid Household Charge or NPPR taxes will remain as a charge on the related property however.

For full details on the local property tax, see our separate blog article at: http://smallbusinessadviceireland.blogspot.ie/2012/12/overview-of-new-local-property-tax.html

VEHICLES

-          VRT

Vehicle Registration Tax (VRT) rates are to be increased with effect from 1 January 2013. VRT reliefs currently in place for electric vehicles and certain hybrid vehicles are to be retained until the end of 2013.

-          Motor Tax

Motor tax rates will increase from 1 January 2013 across all categories although the rate for electric cars is being reduced to €120.

A full list of current and the new revised motor tax and VRT rates is available from page 2 onwards at: http://budget.gov.ie/Budgets/2013/Documents/Annex%20C%20-%20VRT%20and%20Motor%20Tax.pdf

EXCISE DUTIES

-          Alcohol

Excise duty on a pint of beer and cider, and on a standard measure of spirits, is being increased by 10 cent. The excise duty on a 75cl bottle of wine is to be increased by 1 euro. Pro-rata increases take effect on other products. These increases take effect from midnight 5^th December 2012.

-          Tobacco

Excise duty on a packet of cigarettes is to be increased by 10 cent with a pro-rata increase on other products. Excise duty on roll-your-own tobacco will increase by 50 cent per 25g pouch with effect from midnight 5^th December 2012.

SOCIAL WELFARE AND EXPENDITURE MEASURES

-          Statutory Redundancy Payments

The partial refund of statutory redundancy payments to employers, which was substantially reduced last year, is to be abolished completely.

-          Health

The prescription charge for medical card holders to be increased from 50c to €1.50 per item and the monthly cap for a family is being increased from €10 to €19.50.

Drug Payment Scheme threshold is being increased from €132 to €144 per month.

Medical cards to be replaced by GP only cards for persons aged over 70 with a weekly income of €600-€700 for single persons and €1,200-€1,400 for a couple.

-          Social Welfare Changes

No change to core weekly payment rates.

Child Benefit to be reduced by €10 per month.

The length of time which an individual can claim Jobseeker’s Benefit will be reduced by 3 months, from 12 months to 9 months. After 9 months a means test will be required.

Telephone and electricity allowances which are currently available under the Household Benefits package are to be reduced.

-          Education

For third level students, the student contribution to fees will be increased by €250 for the years 2013 to 2015.

Disclaimer: The above list is not an exhaustive list of proposed changes. In addition, the above notes are based on the budget speech and not on draft legislation, which will not be available until the Finance Bill is published. Fenero accepts no responsibility for any action which any individual or business may take or not take based on their reading of this article. Professional advice should be taken before any action is taken.

Contact Details:

www.fenero.ie

01-6877400

info@fenero.ie

Overview of the New Local Property Tax

Overview of the Local Property Tax

The new local property tax will tax effect from 1 July 2013. The property owner will be liable to the tax (and not tenants where the property is rented). Co-owners will be jointly and severally liable for the tax. A half-year payment will be charged in 2013 and a full year payment will be due from 2014 onwards.

The tax will be charged at a rate of 0.18% on properties valued at less than €1 million and at a rate of 0.25% will apply to any excess value over €1 million. Importantly these rates will be known as the “central rates” but from 2015 onwards, local authorities will be able to vary the rate of these “central rates” by up to +/- 15%. Therefore different rates will apply depending on the local authority that you live under.

The amount of tax paid will be determined on a self-assessment basis. i.e. the property owner must establish the market value and calculate the applicable tax amount to be paid. The property tax will be collected by the Revenue Commissioners.

The Revenue will be setting up a dedicated Lo-Call number to deal with enquiries about the tax from 7^th January 2013.

How much tax do I have to pay?

The tax rate will be applied to the market value of your property to arrive at the amount of tax payable. However for the purposes of calculating the tax, property values will be organised into bands.

The first band is €0 - €100,000. Subsequent bands will be organised in values of €50,000 width up to €1 million i.e. the second band is €100,001 to €150,000; the third band is €150,001 to €200,000 etc. The tax liability will be calculated by applying the tax rate to the mid-point of the band. For example, if your property is valued at €130,000 it will fall into the €100,001 to €150,000 band. The mid-point of this band is €125,000. Therefore you will pay 0.18% on €125,000 (and not 0.18% on €130,000). An online calculator is available on the Revenue website to help you work this out at: http://www.revenue.ie/lpt_reckoner/index_en.html

How do I value my property?

In March 2013 the Revenue Commissioners will be sending out an explanatory booklet on the operation of the local property tax including procedures for arriving at the property’s market value. Property owners will also be free to use the services of an independent property valuer if they choose. The new Property Prices Register is also intended to assist people in valuing their property.

You will be required to determine the market value of your property as at 1 May 2013. This valuation will then remain valid for the purpose of your Local Property Tax Return for three years up to and including 2016. This will useful in that you will not need to repeat this exercise each year and also if you improve or renovate the property which may increase the property value before 2016.

However it is not clear from information currently available whether you can choose to revalue your property and resubmit details again before 2016 if you wish to – this would be important in the context of falling property prices.

You will be required to submit a Local Property Tax Return to Revenue stating your valuation either online or using a paper return (however if you own more than one property you cannot avail of the paper return option). Paper returns will be required to submitted by 7^th May 2013. If you are filing online you will have until 28^th May 2013.

Michael Noonan has advised that a number of methods will be used to identify valuations which are far below market value in an attempt to curb any tax evasion which might arise though the intentional undervaluing of a property. This includes a “heat map” showing the average market value of properties in a particular area. The idea is that if one property owner values their property substantially lower than their neighbours, it should be quickly flagged by the Revenue for further investigation.

The government have said they expect that 85% to 90% of properties will be valued at below €300,000.

Are there any exemptions to the Local Property Tax?

The exemptions to the tax will be broadly in line with those applied to the Household Charge. Additional exemptions will also apply to First Time Buyers and to new or previously unused properties.

Second hand properties purchased by a first time buyer in 2013 will be exempt until the end of 2016.

New and previously unused properties which are purchased from a builder or developer between 1 January 2013 and the end of 2016, will be exempt until the end of 2016.

How and when do I pay the tax?

The tax will be operated and collected by the Revenue Commissioners. You can choose to make one single payment or instead to spread out the payments in equal instalments between 1 July and 31 December 2013. If you are opting for one single payment by a single debit instruction, this will be taken from your bank account on 21 July 2013.

There will be a range of payment options including credit/debit card, direct debit and cash payment through certain providers. You can also opt for voluntary deductions at source meaning payment can be deducted from your salary or certain social welfare payments. If you do not elect for a particular payment method, the Revenue will automatically collect the tax at source.

Interest charges will apply to late payment of tax.

What if I cannot afford to pay?

For owner occupiers with a gross income of up to €15,000 (single) and €25,000 (couples), the tax can be deferred in full until financial circumstances improve or until the property is sold. For owner occupiers with a gross income of up to €25,000 (single) and €35,000 (couples), 50% of the tax can be deferred in full until financial circumstances improve or until the property is sold. However interest at 4% per annum will apply to all deferred amounts.

What about the existing Household Charge? And the NPPR tax on second properties?

The Household Charge will cease with effect from 1 January 2013 as this local property tax is to replace it. In addition the NPPR (non principal private residence) charge on second homes will cease with effect from 1 January 2014. Any unpaid Household Charge or NPPR taxes will remain as a charge on the related property however.

Disclaimer: Please note that the information provide above is based on detail announced in the Budget on 5^th December 2012 and is subject to enactment of the Finance Bill 2013.

Contact Details:

www.fenero.ie

01-6877400

info@fenero.ie

Review of 2012 Budget - Tax Changes

There has been a lot of publicity regarding the various announcements made in the Budget last month, but as we start 2012, are you aware of all changes which may impact upon you? Below is our summary guide to the main taxation changes announced:

Income Tax

There have been no changes to income tax rates or bands.

Universal Social Charge (USC)

In 2011 only persons with income lower than €4,004 were exempt from the USC. This was highly criticised and for 2012 the threshold has been increased. In 2012, persons with income of less than €10,036 are exempt from the USC. All Department of Social Protection payments and income already subject to DIRT continue to be exempt from USC.

USC is also now operated on a cumulative basis rather than a Week 1 basis. This does not affect the total USC which is payable, merely improves the timing over which it is paid. Many people will find that they received or are due a refund of USC in their final December 2011 salary payments, due the fact that USC was operated in 2011 on a Week 1 basis. This should not occur again in 2012 as USC will be operated on a cumulative basis throughout the year, adjusting itself as it goes along for an individual’s total earnings to date at that point in the year.

Household Charge

The greatly publicised and unpopular Household Charge comes into effect for 2012. This is a charge of €100 per household. The government have called this an interim measure until a full property tax is introduced in c. 2014. The onus is on each individual household to ensure that they pay this charge. Bills/letters will not be posted to homes. Instead you must pay online at www.householdcharge.ie before 31st March 2012. Late payment fines and also interest will be charged on any payments received after this deadline. Household charges plus accrued fines and interest that remain unpaid will be registered as a charge against the property and will have to be discharged before the sale of a property.

It is important to note that the charge applies to residential property owners. Therefore landlords are liable to pay this tax, not tenants. The household charge is payable on top of the €200 NPPR charge which landlords are also required to pay in respect of their residential rental properties.

An exemption to the household charge exists for houses in certain unfinished housing developments.

Tax on savings

Deposit interest retention tax (DIRT) rates have increased to 30% for payments made annually or more frequently. A rate of 33% will apply to payments made less frequently than annually.

Illness benefit

The 36 day tax exemption for illness benefit has been removed.

VAT

Another highly publicised measure is the increase in the standard rate of VAT from 21% to 23% with effect from 1 January 2012.

Mortgage interest relief

Mortgage interest relief is increased to 30% for First Time Buyers who purchased between 2004 and 2008. There have been some stories in the media that some banks are being slow to update their systems for this increase so it is advisable to check correspondence received from your mortgage provider or contact them to ensure the increase has been added to your account.

Stamp Duty

With effect from 6 December 2011 multiple stamp duty rates for non-residential properties were abolished and replaced with a single rate of 2%.

Capital Gains Tax (CGT)

The rate of GCT has increased from 25% to 30% with effect from 6th December 2011.

A new incentive relief from CGT is being introduced for the first seven years of ownership for properties bought between 6 December 2011 and the end of 2013, where the property is held for more than 7 years. Where the property is held for 7 years, any gains accrued during these 7 years will be liable to CGT.

Capital Acquisitions Tax (CAT)

The rate of CAT has increased from 25% o 30% with effect from 6th December 2011.

The current Group A tax-free threshold is being reduced from €332,084 to €250,000 in respect of gifts or inheritances taken after 6 December 2011. The Group A threshold refers to gifts/inheritances from a parent to a child.

Relevant Contracts Tax (RCT)

A number of changes to the RCT regime were announced during 2011 and these have come into effect from 1 January 2012. The current paper based system has been replaced by an online system and there are now 3 rates of RCT (0%, 20% and 35%) to replace the two rates (0% and 35%) previously in operation.

Excises

The carbon tax has increased from €5 to €20 per tonne on fossil fuels. This applies to petrol and auto-diesel from 6th December 2011 and other products such as kerosene, liquid petroleum gas and natural gas from 1st May 2012.

Vehicle Registration Tax (VRT) and Motor Tax

No changes were made in this Budget to VRT but the subject is under review and consultation with plans to adjust the bands with effect from 1 January 2013.

Motor tax rates increased across all categories.

Pensions

• Employer PRSI relief on pension contributions
The current relief of 50% of employers PRSI for employee contributions to occupational pension schemes and other pension arrangements is removed.

• ARFs
The imputed annual distribution applicable to the value of assets held in an Approved Retirement Fund (ARF) is being increased from 5% to 6% in respect of ARFs with asset values in excess of €2 million.

Currently the standard rate of income tax (20%) is payable for the transfer of ARF assets on the death of an ARD owner to a child of the owner aged over 21. It is proposed that the applicable tax rate should be increased to 30%.

• Vested PRSAs
The annual imputed distribution provisions applicable to ARF’s will also now apply on the same basis to vested PRSAs, where the assets are retained in the PRSA rather than being transferred to an ARF.

Corporation Tax

The 3 year corporation tax exemption for certain start-up companies will include companies commencing to trade in 2012, 2013 and 2014. However the exemption continues to be linked to the total Employers PRSI paid by these companies. Only certain companies commencing to trade in 2009 and 2010 are exempt from corporation tax without being required to meet criteria on Employers PRSI liabilities paid.

A number of changes were made to the R&D tax credit regime with the aim of encouraging a greater take up particularly amongst SMEs.

Domicile Levy

In an attempt to improve the in-take of funds from the domicile levy, the “citizenship” condition for payment of the levy is being removed. The Domicile Levy is a €200,000 charge on Irish domiciled individuals whose worldwide income exceeds €1 million, whose Irish property is greater in value than €5 million and whose liability to Irish income tax in a relevant tax year was less than €200,000.

Please note the above list is not an exhaustive list of proposed changes. In addition, the above notes are based on the budget speech and not on draft legislation, which will not be available until the Finance Bill is published. Fenero accepts no responsibility for any action which any individual or business may take or not take based on their reading of this article. Professional advice should be taken before any action is taken.

Review of 2011 Budget – Tax Changes

Brian Lenihan, Minister for Finance, stated last December that he believed the worst was over and that the 2010 Budget was the last big push of the Irish crisis, how wrong could he have been!

For the second year in a row we have received a savage Budget. As expected the vast majority of changes proposed in the National Recovery Plan 2011-2014 have been included in the 2011 Budget.

In a measure to widen the tax base the Minister has reduced tax credits and standard income tax bands by 10% whilst also introducing a new Universal Social Charge which is to replace the current Health Levy and Income Levy taxes. As expected a number of reliefs have either been abolished or restricted.

A summary of the main proposed changes is as follows:

Tax on Savings

Deposit Interest Retention Tax (DIRT) on deposits is to increase to 27%.

Income Tax

• 10% reduction in Tax Credits from 1 January 2011
Example: Employee tax credit and single person tax credit are to be reduced
by €180 to €1,650

• 10% reduction in Standard Rate Bands from 1 January 2011

• New Universal Social Charge (USC) rate to be introduced which will replace
the health levy and income levy. The proposed thresholds are as follows:

0% < €4,004
2% €0 to €10,036
4% €10,037 to €16,016
7% > €16,016

Abolition of Income Tax Reliefs:

- Rent Relief to be phased out over 8 years; the same timeline as previously
announced for Mortgage Interest Relief.

- Patent Royalty Exemption, effective from the launch of the National Recovery
Plan on 24 November 2010.

- Tax relief on Loans to Acquire an Interest in Certain Companies.

- Abolition of tax relief for Trade Union Subscriptions.

- Tax exemption from BIK for Employer Provided Childcare.

- Abolition of tax relief on subscriptions to professional bodies.

- Tax relief for new shares purchased by employees.

Restriction of Income Tax Reliefs

- Restriction of the tax-free element of ex-gratia termination payments to
€200,000 so that payments above this amount will be subject to tax at the
marginal rate. This change will apply with effect from 1 January 2011.

- €40,000 will be the maximum tax free earnings for artists under the Artists
Exemption.

- PRSI and USC to be charged on:

 Approved Profit Sharing Schemes
 Approved Save-As-You-Earn Schemes
 Unapproved Share Options
 Share Awards

- Restriction of Section 23-type reliefs

PRSI Changes

• Abolition of the employees PRSI ceiling of €75,036 above which no PRSI was
previously payable.
• Class S (Self-Employed) PRSI rate increased from 3% to 4%.
• Introduction of a 4% PRSI charge for certain Office Holders.

VAT

• No proposed changes in 2011.

Stamp Duty

• Purchase of residential property

Reduction in stamp duty payable on residential property to 1% on properties valued up to €1 million, with 2% applying to amounts over €1 million, in respect of transactions executed on or after 8 December 2010;

Abolition of various stamp duty reliefs and exemptions, in respect of transactions executed on or after 8 December 2010, as follows:

First time buyer relief
Exemption for new houses under 125 sq m in size
Relief on new houses over 125 sq m in size
Consanguinity relief for residential property transfers
Exemption for residential property transfers valued under €127,000
Site to child relief

Capital Gains Tax (CGT)

• No proposed changes.

Relevant Contracts Tax

• Replacement of the current RCT rate of 35% with a two-rate withholding system on a revenue neutral basis:

o 20% rate for subcontractors registered for tax with an established compliance record;

o 35% rate for subcontractors not registered for tax;

Excises

• Increase in Mineral Oil Tax on Petrol and Auto-diesel

The mineral oil tax will be increased by 4 cent per litre on petrol and 2 cent per litre on auto-diesel (both inclusive of VAT) with effect from midnight on 7 December 2010.

• Amending the Air Travel Tax to a single rate of €3

A single revised rate of Air Travel Tax of €3 will come into effect on 1 March 2011, on a temporary basis.

• Vehicle Registration Tax (VRT)

The following package of measures will be introduced:
 Extension of the Car Scrappage Scheme to mid 2011
 Extension of VRT relief for Hybrid Vehicles and Flexible Fuel Vehicles
 Increase in the VRT flat-rate for Commercial (Category C) vehicles

Pensions

• Employee PRSI on pension contributions

From 1 January 2011, employee contributions to occupational pension schemes and other pension arrangements will be subject to employee PRSI and the Universal Social Charge. The PRSI change will be legislated for in the Social Welfare Bill.

• Employer PRSI on pension contributions

The current employer PRSI exemption for employee contributions to occupational pension schemes and other pension arrangements will be reduced by 50% from 1 January 2011. The change will be legislated for in the Social Welfare Bill.

• Contribution limit

The annual earnings limit which (along with age-related percentage limits) determines the maximum tax-relievable contributions for pension purposes is being reduced from €150,000 (2010) to €115,000 for 2011. The annual earnings limit for the year of assessment 2010 will also be deemed to be €115,000 for the purpose of determining how much of a pension contribution paid by an individual in the year of assessment 2011 will be treated as paid in 2010, where the individual elects under existing rules to have it so treated.

• Maximum allowable pension funds

The maximum allowable pension fund on retirement for tax purposes (known as the Standard Fund Threshold (SFT)), is to be set reduced to €2.3 million with effect from 7 December 2010 from its current value of €5.4 million.

• Approved Retirement Funds

The annual imputed distribution which applies to the value of assets in an Approved Retirement Fund (ARF) at 31 December each year is being increased from 3% to 5% in respect of asset values at 31 December 2010 and future years.

• Retirement lump sums

The well leaked cap on pension tax free lump sums has been introduced. The overall life-time limit on the amount of tax-free retirement lump sums that an individual can draw down from pension arrangements is being reduced to €200,000. The excess of this amount will be taxed at the standard income tax rate (currently 20%) up to an amount equal to 25% of the new Standard Fund Threshold (up to €575,000). The excess of retirement lump sum payments over that amount will be taxed at the taxpayer’s marginal rate of income tax.

These changes take effect from 1 January 2011.

Corporation Tax

• 3 Year Tax Exemption for Start-up Companies
This scheme is being extended to include start-up companies which commence a new trade in 2011. The scheme is being modified so that the value of the relief will be linked to the amount of employers’ PRSI paid by a company in an accounting period subject to a maximum of €5,000 per employee. If the amount of qualifying employers’ PRSI is lower than the reduction in corporation tax liability otherwise applicable, relief will be based on the lower amount.

• 12.5% corporation tax rate on trading activities to remain unchanged.

Capital Allowances

• Energy-efficient equipment

The scheme of accelerated capital allowances for expenditure by companies on certain energy-efficient equipment is being extended for a further 3 years to end- 2014.

Capital Acquisitions Tax
The current group tax free thresholds are being reduced by 20%. This reduction applies in respect of gifts or inheritances taken from midnight on 7 December 2010.


Please note the above list is not an exhaustive list of proposed changes. In addition, the above notes are based on the budget speech and not on draft legislation, which will not be available until the Finance Bill is published. Fenero accepts no responsibility for any action which any individual or business may take or not take based on their reading of this fact sheet. Professional advice should be taken before any action is taken.

Are my savings safe in Irish banks?

The biggest question on the lips of many at the moment is quite simply, “how safe is my money?” With continuous bad news for the banks on an almost daily basis, it is natural for people to wonder how safe their savings and deposits are. Talk and fears of a run on the banks seem to be featuring in more and more private conversations and in some sections of the media. AIB and Bank of Ireland’s recent interim management statements also confirm the large outflow of deposits since June this year. No matter what their concerns are based on, people have genuine concerns over the security of leaving funds sitting with many Irish banks.

The general consensus from economists, politicians, EU officials, Central Bank officials and most financial advisors and commentators is that there is very little risk to depositors’ savings. Even Roel van Veggel, head of RaboDirect (the bank who has benefited most directly as depositors move their funds there) has said that it is unlikely that savers will lose out.

For many who have lost their jobs or seen the value of their home and pension funds collapse in recent times, it is of course natural that comments from the likes of economists and politicians may offer little reassurance. After all, why believe them now? And if the government, or anyone else, fails to provide the necessary reassurance, people will act on their own concerns. The problem is that a bank run is based on perception. Even if your deposits are safe but people perceive them not to be, the result will be that deposits are withdrawn from the banks and thus the danger that may only have at first been a perceived one then becomes an actual danger. i.e. during a bank run the banks lose their deposits and then as a result actually become unstable or bankrupt. A bank run can therefore become a self-fulfilling prophecy. People need to trust the banks and the government and let’s face it, trust capital is yet another asset which has sadly been almost utterly wiped out. With this in mind, the prospect of a bank run may not be that far-fetched.

If you are amongst the growing number that would prefer to be extra cautious and remove your savings from Irish banks, there are a few options open to you. Some of these include:

1. Rabo Direct. Rabo is a Triple A rated (the highest credit rating there is) Dutch bank operating in Ireland. It has consistently been considered to be amongst the safest banks in the world and being an online based bank, it is very easy to open an account. In fact Rabo also have a “Money Mover” product aimed specifically at ensuring ease of transferring funds to them from your existing accounts. http://www.rabodirect.ie/moneymover/default.aspx . Rabo’s demand saver accounts interest rates are currently 2.0% AER – not the highest rate out there, which they admit themselves. However, in the current climate, the priority for many is now security and peace of mind rather than maximising interest rates. However Rabo do offer higher interest rates for their Term Deposit products i.e. accounts where you agree to lock your funds away for a minimum period of time e.g. 3 years, 5 years etc. (However if you expect that interest rates will rise over the next few years, you might not be inclined to want to lock too much of your funds away for too long a period).

2. Nationwide UK (Ireland). Nationwide UK have an Irish branch operating from Spencers Dock in Dublin. Like Rabo, Nationwide UK will also enable you to conveniently open an account via internet/post. They also offer a range of deposit interest rates although they do have a minimum deposit amount requirement, unlike Rabo. http://www.nationwideuk.ie/default.asp

3. Another option is to take a drive over the border into Northern Ireland and place your funds with a UK bank. However you are then also exposed to some currency risk as your funds will be converted to sterling.

4. There are also a number of off-shore account products available from many UK and other foreign banks such as Barclays or Lloyds. However just make sure to do your due diligence – which country are these banks regulated by, what are their credit ratings etc?

I must also revert to the point made about bank runs becoming a self-fulfilling prophecy. Some people may feel that withdrawing your funds from Irish banks will only be contributing to the overall difficulties that the Irish banks are in. There is truth in this. Also remember that the government guarantee for deposits up to €100,000 is still in place and this also has EU backing. The general consensus is that deposits are safe and savers will not lose out. However with the hardship that Irish people are now facing it is easy to see that protecting the security of your own savings against any risk (even if this is only a perceived and not an actual risk) is going to take priority over what may be a deemed collective good of trying to help the economic situation by leaving deposits with the banks.

What taxes have been affected in the National Recovery Plan 2011-2014?

A summary of the main tax measures and changes highlighted in the four year National Recovery Plan 2011 - 2014 are as follows:

Income Tax
PAYE workers earning €18,300 until now should have incurred no income tax. This threshold will be reduced to €15,300 by 2014 through the gradual reduction of personal tax credits and bands.

Overall total income tax paid by the average worker to increase from 28.6% in 2009 to 33.7% by 2014. This is an overall increase of 5% in income tax for the average worker.

Changes to tax relief available on personal pensions
1. No PRSI or health levy relief to be given on pension contributions from 2011.

2. Annual earnings cap for tax relief on pension contributions to be reduced from €150,000 (which has already been substantially reduced) to €115,000.

3. Income tax relief on pension contributions to reduce from 41% to 34% in 2012, to 27% in 2013 and 20% in 2014.

Tax credits/reliefs to be abolished
- Tax relief for trade union subscriptions
- Tax relief for rent paid (the rent tax credit)
- The income tax aged credit (a tax credit available for persons over 65)
- Artists Exemption to be restricted to earnings of €40,000
- BIK exemption on employer provided childcare
- Tax exemption on patent royalties
- Ex-gratia termination and pension lump sums in excess of €200k to be taxed
- Approved Share Option Schemes

VAT
The 21% VAT rate is to increase to 22% in 2013 and 23% in 2014.

The 13.5% VAT rate is to remain unchanged.

Property Tax
Property tax of an initial €100 per annum per household to be introduced, known as Site Value Tax. The final amounts payable under this tax will be decided in 2013 when property valuations have been completed.

CGT, CAT and Stamp Duty
Plans to abolish many of the reliefs and exemptions available with capital gains tax, capital acquisitions tax and stamp duty. No details yet available.

Corporation Tax
The government reiterates its firm commitment to maintaining corporation tax at a rate of 12.5%

National Recovery Plan 2011 - 2014 (The Four Year Plan)

The government has this afternoon published it's Four Year National Recovery Plan. The full text is available at:

http://www.budget.gov.ie/The%20National%20Recovery%20Plan%202011-2014.pdf