The Government has delivered its Budget 2022 statement this afternoon. While last year’s package of over €17 billion was the largest ever, delivering a range of measures to address the impacts of the Covid-19 pandemic and Brexit at a time of extreme economic uncertainty, this year’s Budget package of €4.7 billion is relatively modest by comparison.
The Government is focusing primarily on managing the higher levels of debt created by its pandemic response, but also capitalising on a much-improved economic forecast for 2022 which predicts a strong recovery after the pandemic. The economy is expected to grow by 6.5% in 2022, with employment figures reverting back to pre-pandemic levels. There is also a focus on delivering measures to assist with alleviating inflationary pressures faced by businesses and individuals due to cost of living increases.
The Budget statement also confirmed that for the first time in nearly 20 years, Ireland’s effective corporation tax rate of 12.5% will be increasing from 2023. However, the effect of this decision on wider business is unlikely to be significant – the new 15% rate will apply only where revenue exceeds €750 million a year which means only the largest employers in Ireland are likely to be affected.
On pensions issues, there is a sense of déjà vu as for the third year in a row the Budget excludes any measures relating to private pension provision.
In particular, there was no mention of any allocation of expenditure for investment in the implementation of the automatic enrolment retirement savings system, a policy which was specifically included in the 2020 Programme for Government. The status and future of this initiative remains extremely uncertain.
It was also notable that there was no mention of the recently-published Pensions Commission report, which has advocated recommendations to reform the State pension system. The Government has previously committed to take action within 6 months having regard to the Commission’s recommendations.
The lack of attention that pension saving has received in recent years is disappointing given the serious questions that need to be addressed regarding the long-term overall cost and sustainability of the State pension and the need to incentivise supplementary pensions coverage.
As had been widely flagged, the full rate of contributory State pension will be increasing for the first time since 2019 by €5 a week to €253.30 per week (€13,171.60 per year). This will affect all ‘integrated’ defined benefit schemes which continue to calculate benefits and/or contributions by reference to the prevailing rate of contributory State pension. It is unclear when the increase will take effect; in recent years, increases have applied from March, which has created additional calculation complications for integrated schemes.
The Budget is light on measures relevant to employers. Of note:
In general, tax changes are limited. In particular:
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