Setting the scene. Joe Tynan

Transcription

1 1

2 Setting the scene Joe Tynan

3 #PwCBudget17 3

4 Context Low growth Globalisation Debt US election Fair share Brexit 4

5 Budget 17 Government revenue 10 years on 55 billion 58 billion

6 Interest on national debt

7 Income tax % 7

8 Speakers Economic update Business taxes Employment taxes Tax strategy Austin Hughes KBC Liam Diamond Doone O Doherty Joe Tynan 8

9 Economic update Austin Hughes

10 Budget 2017 Austin Hughes KBC Bank Ireland

11 Beware of optimistic economists Global growth has repeatedly disappointed Uncertainty the new economic watch word Facing up to risks and realities Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct

12 Brexit has already begun for many Irish exporters Brexit in three parts: Exchange rate pain Uncertainty affecting investment How distorted will the new order be? 12

13 Domestic demand improving unevenly Recovery now broadening Pent-up demand and legacy problems Still lacking a feelgood 13

14 Income taxes have surged while incomes have struggled Average earnings only now returning to pre-crisis levels Income tax increases leading to suffering or stability? 14

15 Public finances steadily approaching the promised (prudent) land Ireland, Structural budget deficit (percentage of potential GDP at current prices) Ireland, General Government Balance less Financial Transfers (% GDP) 15 Only 3 of 28 EU countries expected to have a lower public deficit in 2017 Headline and underlying government deficit now close to balance Promised land reached in 2018, implying greater scope for giveaways

16 Making a little go a long way Public spending and tax adjustments altogether smaller than the norm in either good or bad times Budget broadly indexes to keep real value of spending and effective tax burden broadly unchanged but proportion of workforce paying higher tax rate to rise in 2017 Will spreading the benefits so thin be sustainable? 16

17 Fiscal space: the twilight zone Reference rate of potential growth (New) Reference rate of potential growth (Previous) In spite of much stronger growth, potential has declined? Revisions likely to boost fiscal space in time for election 20?? Fiscal space slightly exceeded in Budget 2017 Spending commitments limit scope for tax adjustments 17 Implied gross fiscal space now available (New) Implied gross fiscal space now available (Previous)

18 A shared view of a modest slowdown Macroeconomic Forecasts for Ireland KBCI DOF KBCI DOF Consumer spending Government consumption Investment Exports Imports GDP (f) GNP (f) Department of Finance and KBCI views broadly similar General government balance (% GDP) BOP current account (% GDP) General government debt Employment (% change) Unemployment rate HICP

19 2010M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M07 Higher house prices or more homes? , , , , , , , , ,000 A year later, a possible error Spending on new homes has roughly doubled in past 3 years Will supply or prices respond? Have lessons been learned? 0 100,000 First-Time Buyer, New Houses Bought (3mma) First-Time Buyer, Average Price, New Houses (3mma) 19

20 Summary Passing a budget must count for something. Public finances improving while economy gets a little lift likely to be a bumpy rather than a bumper year. The giveaways may not have not gone away for good. 20

21 Business taxes Liam Diamond

22 Navigating through uncertainty 22

23 Budget 17 Business taxes 12.5% rate will not be changed Update on Ireland s International Tax Strategy published Independent review of corporate tax regime Seamus Coffey Fair, competitive, certain, transparent regime which meets international standards Sugar tax consultation, aligned with UK/

24 Budget 17 Getting Ireland Brexit Ready Safety nets, economic shock absorbers. All positive tax changes = Brexit readiness 12.5% rate 6.25% KDB additional benefit for SMEs Retention of reduced 9% VAT rate (tourism/hospitality) Mobility tax changes (SARP/FED) Agri/marine sector, self employed, entrepreneurs etc. Review of 1% stamp duty on shares 24

25 Budget 17 Financial Services S.110 changes (announced 6 Sept 2016) Considering further funds measures Estimated 50m tax yield for 2017 Changes only applicable to Irish property investments 25

26 2016 lots going on! Ireland s progress EU ATAD BEPS CCCTB US elections UK & Brexit Inversions US treaty Apple & State Aid 26

27 EU 2 major tax initiatives Anti-Tax Avoidance Directive ( ATAD ) CFC 2019 GAAR 2019 Hybrids 2019 Exit taxes 2020 Interest deductions 2024 Common Consolidated Corporate Tax Base ( CCCTB ) Overall context for ATAD Unanimity required Impact of Apple case / Brexit Repeat of last time? 27

28 UK & Brexit Hard exit no later than March 2019: immigration control vs. free trade Opportunities Ireland offers stability Access to EU labour market critical Ireland well placed for new FDI There will be some relocations Financial Services especially 28

29 UK & Brexit Hard exit no later than March 2019: immigration control vs. free trade x x x x x Uncertainty for Irish business Especially and Irish exports to UK Supply chain / border controls (New) UK competitive advantages? UK CT rate reduction aspirations Risks 29

30 Apple & State Aid competition law Advantage State resources Selective Distorts competition 13bn plus interest Pre-Transfer Pricing Pre- Stateless changes A novel approach: free for all Does it remind you of something? Strong US reactions Appeals x 2 Affects trade 30

31 US a more (re)active IRS / Treasury US/Ireland treaty Election / reform? State Aid reactions Inversions S.385 debt rules 31

32 What happened to BEPS? Hybrids, mismatches, double non-taxation, etc. Have we seen much coherence yet? Transfer Pricing Profits & substance IP & DEMPE Coherence Country by Country Reporting / +EU OECD/EU ruling disclosures EU accounts disclosures Substance Transparency 32

33 Ireland s BEPS influenced journey % rate 2004 HoldCo regime 2011 Transfer Pricing 2015/2021 IRNRs 2017 Strategy + Independent review Accounts disclosure (EU) 1990s 10% rate 2004 R&D tax credits 2009 IP tax depreciation 2014/2015 Stateless removed % KDB CbCR commences Some more to come. OECD & EU disclosure regimes 33

34 Areas of focus Financial Services PLCs / Domestic FDI Brexit opportunities Regulatory regime US treaty qualification Irish property / S110s Funds / tax exempts Brexit challenges US treaty qualification EU ATAD Interest deductibility CFC / dividend taxation Brexit risks & opps Apple / State Aid Diverted Profits Tax Phasing out IRNRs EU ATAD 34

35 So where does this position Ireland? EU / Eurozone / OECD Access to talent pool BEPS compliant regime Not a rulings regime 12.5% statutory rate 6.25% KDB 25% R&D tax credits IP tax depreciation Attractive HoldCo regime Good treaty network (70) Affects trade 35

36 Ireland s corporate tax future? But the future is bright! Uncertain times Lots done, (some) more to do 36

37 Employment taxes Doone O Doherty

38 Employment taxes Individual Employer State 38

39 Putting the you in USC 39

40 Universal Social Charge changes Salary First 12,012 1% Before Budget Salary First 12,012 Next 6,656 3% Next 6,760 Next 51, % Next 51,272 After Budget % Change 0.5% 0.5% 2.5% 0.5% 5% 0.5% Balance 8% Balance 8% - Surcharge 3% Surcharge 3% - 40

41 Universal Social Charge changes 25 pm 55 pm 41

42 International standing 23rd World Economic Forum Report th IMD World Competitiveness Report

43 International comparison Effective Tax Rate Salary 55,000 (single) Total effective tax rate (%) 60% 50% 40% 30% 20% 10% CH SGP UK US - NY IRL LUX NLD FRA GER 0% CH SGP UK US - NY IRL LUX NLD FRA GER 43

44 International comparison 60% Effective Tax Rate Salary 95,000 (single) Total effective tax rate (%) 50% 40% 30% 20% 10% SGP CH US-NY UK FRA LUX IRL GER NLD 0% SGP CH US-NY UK FRA LUX IRL GER NLD 44

45 International comparison 60% Effective Tax Rate Salary 200,000 (single) Total effective tax rate (%) 50% 40% 30% 20% 10% SGP CH US - NY UK LUX GER FRA IRL NLD 0% SGP CH US - NY UK LUX GER FRA IRL NLD 45

46 There is relief to attract overseas talent 30% of salary over 75K exempt from income tax 46

47 What else is out there? Share based remuneration CGT relief Revenue audits Gifts / inheritances Work, travel & mobility 47

48 Share based remuneration 48

49 Capital taxes CGT relief for entrepreneurs % 49

50 Foreign Earnings Deduction 50

51 Capital taxes CAT 310k 51

52 Other changes 01 Help to Buy Scheme 06 DIRT 02 Landlords and interest deductibility 07 Earned income tax credit 03 Rent a room 08 Home renovation incentive scheme 04 Mortgage interest relief 05 Home carers credit 09 Climate change and carbon tax 52

53 Travel and mobility New ways of working International focus Revenue scrutiny 53

54 What does the future look like? 54

55 Employment taxes - recap Individual Employer State 55

56 Tax strategy Joe Tynan

57 Three key factors Increased Transparency Increased transparency Demand for a fair share 57 International competition

58 From strategy to execution International factors State Aid CbCR Public CbCR ATAD UK anti-hybrid rules CCCTB US/Ireland treaty Brexit US election BEPS 58

59 From strategy to execution Finance Bill #1 Property funds Disclosure of accounts Innovation R&D, KDB, IP Corporation tax review Domestic factors Finance Bill #2 New Appeals process Interaction with Revenue Domestic political environment Directors Compliance Statement 59

60 Closing thoughts Economy Business Employment Tax strategy 60

61 Find out pwc.ie Budget 17 website Brexit website Graduate recruitment website Alumni website 61

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