This was a highly extraordinary and unprecedented Budget. The Minister of Finance Paschal Donohoe T.D. stating that “Budget 2021 has been prepared against a background of extraordinary uncertainty regarding near-term economic and budgetary prospects. As a result, it is exclusively focused on the coming year”. The Minister in framing the Budget set out the two pillars underpinning Budget 2021, namely:

• No bi-lateral trade deal between EU and UK, resulting in a projected reduction in Irish growth by just under 3% and 
• Framed on an assumption of the continued presence of the virus in 2021 and the absence of a broadly available vaccine in 2021

When one looks back to Budget 2020, the focus was on prudence and building reserves to deal with the challenges posed by Brexit. The country entered 2020 with a Budget surplus of €1.3bn and a Rainy Day Fund of €1.5bn, principally designed to act as a shock absorber to help deal with the fallout of Brexit. What a difference a year makes! The impact of Covid-19 has meant that total government supports in 2020 have already amounted to €24.5bn, nearly 8 times the 2020 Budget. The Minister is forecasting a Budget deficit of €21.5bn for 2020 and intends fully utilising the Rainy Day Fund. The focus of this Budget is on borrowing and spending to protect vulnerable sectors of the economy. The Minister clearly setting out the objectives:

1. Rapidly building up healthcare capacity; 
2. Protecting household incomes; 
3. Supporting employment.

As regards some of the specific taxation measures introduced in the Budget, a summary is as follows:

• Introduction of the Covid Restrictions Support Scheme (CRSS) aimed at supporting those sectors of the economy effectively suffering loss as a result of the introduction of level 3 (and above) locks downs. The principal applicants will likely be the hospitality, arts and entertainment sectors. Qualifying businesses will be able to apply to the Revenue Commissioners for a cash payment in respect of an advance credit for trading expenses for the period of the restrictions. Payments will be calculated on the basis of 10% of the first €1m in turnover and 5% thereafter, based on average VAT exclusive turnover for 2019, subject to a maximum weekly payment of €5,000 
• A commitment to replace the Employment Wage Subsidy Scheme (EWSS) when it expires on 31 March 2021 with a similar scheme until the end of 2021 
• Reduction in the reduced VAT rate from 13.5% to 9% for the hospitality and tourism sectors effective from 1 November until 31 December 2021. 
• Extension of tax warehousing to include the balance of income tax for 2019 and 2020 preliminary tax obligations for the self-employed. This is very timely and welcome given that many taxpayers were facing the prospect of having to fund income tax payments over the next two months 
• Minimal changes to income tax rates and bands – slight adjustment to USC and employers PRSI to align with the increase in the minimum wage 
• An increase of €150 in the Earned Income Credit. 
• An overhaul of Motor Tax and VRT 
• Carbon tax will be increased by €7.50 from €26 to €33.50 per tonne/CO2. This is applicable to auto fuels from tonight and all other fuels from 1st May 2021. 
• Increase excise duty on a pack of 20 cigarettes by 50 cents, with a prorata increase on other tobacco products. 
• Some technical changes to Entrepreneur relief intended to broaden the relief 
• Extension of the Knowledge Development Box (KDB) by 2 years to the end of Dec 2022 
• Implementation of the limitation on interest and anti-reverse-hybrid provision of ATAD in 2021.

Whilst we didn’t see any specific provisions in the Budget, the Minister indicated that we will see changes in the following in the future:

• EIIS scheme is to be reviewed with a view to enhancing it
• An Interdepartmental group has been established to develop a strategy for remote working and remote service delivery. 
• Whilst the Minister reaffirmed Ireland’s commitment to the 12,5% rate of corporation tax, the Minister clearly flagged that Ireland’s corporate tax regime will come under pressure in the not too distant future and that we can expect changes drive by international developments. The Minister has committed to providing an update on Ireland’s Corporation tax roadmap. 
• The Minister will commence work on tax credit for digital gaming section Qualify activity Jan 2022 onwards

Overall, this Budget is clearly a response to the pandemic and the significant challenges facing the economy. It is focused on the short term and is about protecting and supporting vulnerable sectors of the economy and employment throughout 2020 and 2021. The challenges presented by COVID-19 and a possible no-deal Brexit are immense, requiring a fundamental change in budgetary policy and unprecedented state support. The level of State support to business in the context of TWSS, EWSS, CRSS, reduction in VAT rates as well as the warehousing of tax debt must be acknowledged. For many businesses these supports are providing a lifeline. The Minister has indicated that this budget is a “Bridge to that Better future”. With this budget, the Rubicon has been crossed. The real challenge will be the timing of the reversal of the significant State supports.