Minister Donohoe announces details of tax measures contained in the July Stimulus Plan

The July Jobs Stimulus Plan announced by the Government contains a suite of tax, loan and expenditure measures designed to directly support business at all levels of the economy that are negatively impacted by Covid-19.

The Stimulus is the next stage in Ireland’s response to the COVID-19 crisis and will help ensure Ireland’s businesses get back on their feet and as many people as possible can return to work as and when it is safe to do so.

The Stimulus Plan includes a number of fiscal measures which have been set out in the Financial Provisions (Covid-19) (No.2) Bill 2020, due to be published shortly and to be considered by the Oireachtas next week.

The Bill will provide for the introduction of the Employment Wage Subsidy Scheme (EWSS); an enterprise support to employers that will focus primarily on business eligibility, delivering a per-head subsidy on a flat rate basis. This Scheme will replace the Temporary Wage Subsidy Scheme from the 1st of September. Both schemes will run in parallel from July 31st until the TWSS concludes at the end of August to provide additional flexibility to employers with new hires and seasonal workers who were not previously eligible to be paid via TWSS and who may now qualify for EWSS.

The Tax measures to be included in the draft Bill are:

A Stay and Spend incentive for the accommodation and food sector, the purpose of which is to boost out-of-season demand for these important activities;
Enhanced corporate tax loss relief to provide additional liquidity supports for businesses;
Income tax relief for self-employed individuals to provide liquidity;
Temporary reduction in the standard rate of VAT from 23% to 21%.
Enhancements to the Help to Buy Scheme for the remainder of 2020;
Amendments to the ‘Cycle To Work Scheme’;
Legislative basis for the warehousing of tax liabilities; and
Reduction in the interest rate applying to agreed repayments of all tax debt

Commenting on the extensive suite of tax measures, the Minister for Finance, Paschal Donohoe TD, said:

‘The COVID-19 pandemic continues to present us with unprecedented economic and social challenges. Never before has an Irish Government acted so swiftly, and so strongly, to an economic emergency. The focus of the July stimulus package is on measures that immediately and directly support the economy and help to actively retain and create jobs. The core objective of the measures contained in the Financial Provisions (Covid-19) (No.2) Bill is to foster economic activity, support businesses and get as many people back to work as quickly as possible. This Bill which is part of the wider Stimulus Plan is designed to get businesses back on their feet, bring back confidence to consumers and kick-start the economy.

“This package represents the continued commitment of the Government to support our economy through this period of challenge and to provide certainty. It is entirely appropriate that Government employ these targeted measures to assist those who have been most affected by the pandemic. When combined with previously announced measures in the first phase of our response, the July stimulus represents an unprecedented level of Government support to our economy.

“However, this is an option that is available to us because of the work that has been done in recent years in placing the public finances on a sustainable trajectory. It is essential that, as we recover and look to the future, we return the fiscal position to a sustainable and credible trajectory at the appropriate time”.

ENDS

Notes to Editors

A number of fiscal measures have been proposed as part of the ‘July Stimulus’ announced by An Taoiseach on 23 July. These measures will be set out in a Financial Provisions (Covid-19) (No.2) Bill 2020 due to be published shortly.

Employment Wage Subsidy Scheme

With the introduction of the Employment Wage Subsidy Scheme (EWSS), the Government will deliver an enterprise support to employers based on business eligibility delivering a per-head subsidy on a flat rate basis.
The EWSS will replace the Temporary Wage Subsidy Scheme (TWSS) from the 1st of September. Both the TWSS and EWSS will run in parallel from July 31st until the TWSS concludes at the end of August to provide additional flexibility to employers with new hires and seasonal workers who were not previously eligible to be paid via TWSS and who may now qualify for EWSS.
The EWSS will be an economy-wide support, open to all sectors. The primary criteria for qualification is that the employer must demonstrate that they are operating at no more than 70% turnover from the period July to December 2020 compared to the same period last year.
The EWSS will run to the end of March 2021 at a gross cost of €2.35 billion.

Tax measures

Some €900 million* will be introduced in tax relief measures, including:

‘Stay and Spend’ incentive, tax credit to encourage tourism within Ireland

This scheme will incentivise taxpayers to support domestic providers of accommodation and/or food during the off-season, providing support to a particularly impacted sector.
A taxpayer must spend a minimum of €25 on qualifying expenditure and submit the receipt to Revenue using a mobile app.
The taxpayer may submit receipts up to a cap of €625 total. Revenue will provide an income tax credit of €125 per taxpayer, or up to €250 for a jointly-assessed married couple.
This incentive is confined to the period 1st October 2020 to 30th April 2021.

Accelerated Corporation Tax loss relief for companies

This will accelerate repayments of corporation tax that would otherwise become due over the next 18 months, providing cash-flow support to previously profitable companies experiencing losses as a result of public health measures.
The maximum amount of the expected current year loss which will qualify for early carry-back will be 50%. The balance will qualify for carry-back under the normal rules in due course.

Income tax loss relief for self-employed

This is a new once-off income tax relief measure which will benefit self-employed individuals who were profitable in 2019 but, as a result of the Covid-19 pandemic, are loss making in 2020.
The measure will give individuals carrying on a trade or profession as sole traders or members of partnerships a cash-flow boost from the early utilisation of up to €25,000 worth of 2020 losses (and certain unused capital allowances) off-set against 2019 profits.
The measure includes an additional option for farmers to step out of income averaging for the 2020 tax year.
It is estimated that this will result in a liquidity boost of €150 million in 2020 for those affected.

Temporary reduction in the standard rate of VAT at a cost of €440 million

The standard rate of VAT will be decreased from 23% to 21% for the period 1 September 2020 to 28 February 2021.
The standard rate applies to some 53% of activity, including the supply of cars, petrol, diesel, alcohol, tobacco, electrical equipment and adult clothes and footwear.

Enhancement of the help-to-buy scheme for the remainder of 2020 ( €18m)

The level of support available to first time buyers will be increased to the lesser of €30,000 (up from €20,000) or 10 per cent (up from 5 per cent) of the purchase price of the new home/self-build property.
The enhancement to the scheme is intended to stimulate demand from first time buyers for new houses in the housing market, to encourage house completions and to assist first time buyers in accumulating a deposit for a new home.
The change will be effective immediately and will apply to applicants who sign a contract for the purchase of a new house or who have yet to make the first draw down of the mortgage in the case of a self-build. It will expire on 31 December 2020. All other parameters of the scheme will remain the same.

Amendments to the ‘Cycle To Work Scheme’

The allowable expenditure will be increased from €1,000 to €1,500 in respect of ‘ebikes’ and €1,250 in respect of bicycles. The scheme currently allows the purchase of a new bicycle every 5 years and this will be reduced to 4 years.
All other parameters of the scheme will remain the same.

Legislative basis for the warehousing of tax liabilities

This will allow for businesses affected by Covid-19 to delay payment of their PAYE and VAT debts in part of in full for a set period with no interest or penalties (announced in May and currently being operated by Revenue Commissioners pending legislation).

Reduction in the interest rate applying to agreed repayments of all tax debt

All taxpayers (sole traders and businesses) that have declared but unpaid tax debts can avail of a reduced interest rate of 3% provided they contact Revenue to agree payment of these debts or have entered into an agreement to pay these debts on or before 30 September 2020.

*Net Cost to Exchequer. The total value of the tax package is €1.4 billion (CT losses €450 cost-neutral to Exchequer)

‘July Stimulus’ Policy Initiative: Overview of economic support measures

Financial Provisions (Covid-19) (No. 2) Bill 2020 and Explanatory Memorandum