Higher earners are in line to gain more from Budget 2015 than those on middle or low incomes
By David Murphy Business Editor
It was supposed to be a Budget targeted at low and income middle earners – the reality was the higher earners will be better off too.
In fact, highly paid foreign executives who come to Ireland to work for a multinationals will do very well from Michael Noonan’s measures.
He has removed a number of restrictions on the Special Assignee Relief Programme (SARP). It means that 30% of a foreign executive’s salary over €75,000 will be tax exempt.
This provision had a ceiling of €500,000 but Michael Noonan has removed that cap entirely.
It is a clear attempt to make Ireland an attractive place to relocate for senior executives working in foreign multinationals and it is part of a package of measures to soften the blow of the removal of the ‘Double Irish’ tax arrangement.
Those who live in Ireland full time also had good news in the Budget. But it is a fallacy to suggest it only benefitted low and middle income earners.
Even the case studies cited by the Department of Finance show the extent of the benefit for the wealthy.
One example shows a single parent, Michael, on €40,000 who will make an annual gain of €466 as a result of the Budget. In contrast another case study shows Laurna, who earns €120,000, will be €687 better off.
Overall, though, the surprise from the Budget is the extent of the give-away. Despite the expectation that there would be a neutral package of measures it was an expansionary Budget.
It means the Government has injected about €500m into the economy. That is an enormous turnaround from the original plan which would have seen €2bn taken out of the economy.
So how did Michael Noonan do it? The answer is economic growth.
Despite cutting the higher rate of tax and the Universal Social Charge the amount of income tax the Government expects to collect will rise by €800m next year, an increase of 4.7%.
The Government has pencilled in an increase in Gross Domestic Product of 4.7% this year and 3.9% in 2015.
If strong expansion continues into future years the Government will have little to worry about – if economic growth wobbles then the reduction in taxes will look politically naive and economically dangerous.