Comment: Last year's Budget was the first since 1978 in which there were no increases in tax rates, levies and duties. Minister for Finance Brian Cowen continued in a similar vein this year and again no increases were announced.
This might give the impression that the Budget is largely neutral for business but the reality is that it will have a significant impact on business in a number of key areas.
On the positive side, capital duty has been abolished. This completes a process started last year when the rate of capital duty was reduced from 1 per cent to 0.5 per cent.
The change is good news for inward investors and it puts Ireland in a strong position to promote itself as a headquarters location, emphasising the other fiscal benefits it offers in terms of R&D tax credits, an extensive tax treaty network and a 12.5 per cent corporate tax rate on profits.
Changes have been announced in the pensions area which are aimed at limiting the tax benefits that apply to large individual pension funds. The maximum pension fund that can be tax-relieved has been set at €5 million, which broadly translates into a pension of €250,000 per annum.
This may cause administrative issues for employers if the new lifetime limit of € 5 million is to apply also to those with defined benefit schemes.
A new limit is also introduced on tax-free pension lump sums which will impact those at the higher end of the spectrum.
An annual tax on approved retirement funds (ARFs) has also been introduced in order to address what the Minister sees as a long-term deferral of tax liabilities using pensions.
Mr Cowen announced last year that he would carry out a root-and-branch review of tax reliefs and incentives to ensure there was an appropriate balance between the equity of the tax system and the economic benefits of such reliefs.
While certain property-based tax reliefs have survived, most are being discontinued, although transitional arrangements will apply to "pipeline projects".
Perhaps the most significant change in the area of tax reliefs is the restriction introduced on the use of tax reliefs by high- income taxpayers.
The operation of the measure is complex but the general thrust is to ensure high-income taxpayers are taxable on at least 50 per cent of their income.
Given the complexities involved in introducing such a measure, the start date is being deferred until January 1st, 2007.
The Minister has announced that the "remittance basis" of taxation is to be abolished.
This is very unwelcome as the "remittance basis" has been an important tool to enable the multinational sector to control the cost of foreign assignments into Ireland and in continuing to attract foreign direct investment into Ireland.
The Minister has seen fit to abolish the "remittance bases" from 2006, perhaps because of perceived abuses in some quarters. Many international employers will view this as a regressive move.
Finally, another negative measure announced by Mr Cowen is the restriction of interest relief on certain loans used to purchase shares in group companies. He has stated that the new restriction will apply only to prevent artificial structures; it is important that this will be the case given that this relief is widely used in the context of commercial financing transactions.
All in all, it is likely that the Budget will, at best, receive a mixed response from business.
Colm Kelly is head of tax and legal services at PricewaterhouseCoopers
