PwC Pre-Budget 2012 Presentation

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  • 1. www.pwc.comPresentation toDublin Chamber ofCommerceTim O’RahillyPrivate Client Services30 November 2011
  • 2. Overview1. Current Tax Environment2. Budget 20123. Trends in Tax-Efficient Structuring 2PwC
  • 3. www.pwc.comCurrent TaxEnvironment
  • 4. Current taxation environment • Huge changes to tax system in last 3 years to cope with crisis in public finances • Climate for business remains generally positive - Incentives for new businesses, new employees - 12.5% corporate tax rate remains, despite challenges • Situation more challenging for individuals.... - New taxes - Restrictions on reliefsPwC Slide 4
  • 5. Recently introduced taxes: • Income levy (superseded by USC) • Carbon tax • Non Principal Private Residence Charge (NPPR) • Universal Social Charge • Pension fund levy • Domicile Levy • Household charge (to come) Combined with... • Increases in rates / reduction in bands & creditsPwC Slide 5
  • 6. Challenges for Individuals... • Income level at which top tax rate is hit (single person) Single Person US (Boston) $373,650 40.3% Germany €250,731 45% Spain (Madrid) €175,000 44.9% UK £150,000 50% France €70,830 41% Ireland €32,800 48%PwC
  • 7. Personal Tax: Future Directions Income Tax 2011 2015 Marginal Tax Rate 52% - 55% ? Property & Other Reliefs Mainly Phased Out? ? Share Options Gains 52% tax ? Pensions 2011 2015 Pensions Earnings Cap €115,000 Relief only at standard rate? Max Tax-Free Fund €2.3M €1.5M Max Tax-Free Lump €200,000 ? Sum CGT & CAT CGT and CAT Rates 25% 30%? CAT Parent-Child €332,084 €250,000? Threshold Business / Dwelling Currently untouched Flagged for limitation / House Reliefs abolition June 2011PwC Slide 7
  • 8. Corporation Tax: External Pressures12.5% remains in place despite externalpressures... CCTB Discussion of Irish tax rate in context of EUnegotiations US Developments 8PwC
  • 9. www.pwc.comBudget 2012What can we expect?
  • 10. Budget 2012• Context• 4 year plan• Medium Term Fiscal Statement• Recommendations of Commission on Taxation (2009)• Expected Changes November 2011PwC 10
  • 11. November 2010 – 4 year plan 2011 2012 2013 2014 Total €m €m €m €m €m Income Tax 1,245 260 210 160 1,875 Pensions 260 225 225 155 865 Tax Expenditures 405 100 100 60 665 Site Value Tax - 180 175 175 530 Carbon Tax - 220 - 80 300 Capital Tax - 145 - - 145 Value Added Tax 310 260 570 Other measures 110 - - - 110 TOTAL 2,020 1,130 1,020 890 5,060PwC 11
  • 12. Budget 2012 €m Tax required 1,600 Carry Forward 600 New 1,000 VAT 670 Household Charge 160 CGT & CAT: Rates & Reliefs 100 Misc 70 Total 1,000 November 2011PwC 12
  • 13. What’s in Store....Income Tax?• Scope for further increases in income tax? General acceptance that “tipping point” been reached• Annual Property Tax? Needs to raise €160M Cost per household €100 - €200?• Other Measures Strengthening of residence rules / removal of remittance basis? Review of effectiveness of anti-tax avoidance measures? November 2011PwC 13
  • 14. What’s in store.....VAT?• Proposals in the area of VAT, Excise Duties and Carbon Tax are being examined• Programme for Government commitment that any increase in VAT will limit the standard rate of VAT to 23%”• VAT rates 1991 – 2011 o 1 March 1991 21% o 1 January 2001 20% o 1 March 2002 21% o 1 January 2009 21.5% o 1 January 2010 21%• Impact on a fragile retail economy?• Will VAT receipts rise?PwC 14
  • 15. What’s in Store.... Capital TaxesRate 30% rate? Tiered rates?Abolition of Reliefs? Retirement relief / Business property relief / Agricultural relief Thresholds Loss relief CGT / CAT offset Principal private residence relief November 2011PwC 15
  • 16. www.pwc.comTrends in Tax Planning
  • 17. Current TrendsHigh Earners Restriction limits use of traditional reliefs (patent income, capital allowances etc) for High Net Worth individualsOther avenues being explored: -> personal service companies -> employee incentivisation - growth shares -> restructuring of debt November 2011PwC 17
  • 18. Personal Service Companies• Planning for the future/structuring for a tax efficient exit• Deferral/mitigation of Income Tax & Capital Gains Tax (CGT)• Tax-free reinvestment• Tax efficient cash extraction• Retain competitive edge – measures to avoid accounts information beingpublicly available• Various options depending on requirements, current cash resources,timescale etc June 2011PwC Slide 18
  • 19. Tax Planning around EmployeeIncentivisation – Growth Shares Management Ordinary Shares „B‟ Shares Company June 2011PwC Slide 19
  • 20. Debt restructuringPreviously...• individuals held property in own name• capital allowance schemes meant rent could be earned tax-free• no restriction on interest deductibilityNo longer viable introduction of High Earner’s Restrictions andbroad application of Income Levy / Universal Social Charge now more efficient for both property and debt to be held in a company restructuring of debt / agreement of bank required June 2011PwC Slide 20
  • 21. www.pwc.comTim O’RahillyMarie FlynnPrivate Client Services
  • 22. www.pwc.comThank You