Ireland's "National Recovery Plan 2011-2014" was released on 24 November last. The Plan is required to deal with Ireland's current fiscal challenges and lays out a roadmap for a return to sustainable growth in the Irish economy.

The Plan outlines fiscal adjustment measures of €15 billion over a four-year period. This adjustment is comprised of substantive reductions in expenditure and some €5 billion of taxation measures, principally involving taxes on individuals and property, as well as indirect and capital taxes. Some of the key tax measures contained in the Plan are summarized below. The Minister for Finance delivered the 2011 Budget on December 7 and this specified how the first year of the Plan will be implemented.

12.5% tax rate

The Plan and Budget 2011 reaffirms Ireland's unambiguous position on maintaining the 12.5% corporate tax rate as a cornerstone of Irish taxation and economic policy.

This commitment to the 12.5% rate is confirmed repeatedly throughout the Plan, with references to the rate representing "an essential pillar of enterprise policy" and not being increased "under any circumstances".

Immediately after publication of the Plan on November 24, a motion was also passed in the Irish Parliament supporting the maintenance of the 12.5% rate, receiving unanimous cross-party approval.

Also, on November 28, the Irish Prime Minister confirmed that that the terms of Ireland's financial support package principally from the EU/IMF does not involve any change to Ireland's 12.5% corporate tax rate.

Other taxation measures

The other taxation measures proposed in the Plan which may be relevant for existing and prospective international investors include the following:

  • broadening of the income tax base, including a phased reduction in income tax bands and credits;
  • a phased reduction in various pension related tax reliefs;
  • changes to various employee incentive/ share plan arrangements;
  • a proposal to broaden the capital gains tax ("CGT") base by moving from a single 25% rate to a system of differing rates and abolishing or restricting certain reliefs and exemptions;
  • a phased increase in the rate of VAT from the current rate of 21% to 22% in 2013 and 23% in 2014; and
  • an increase in carbon tax from €15 to €30 per tonne by 2014.

The Plan does not include any changes to the recently introduced and enhanced Special Assignment Relief Program ("SARP"), which provides tax benefits for inbound assignees to Ireland.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.