Northern Ireland’s Chartered Accountants said that Chancellor Alistair Darling’s Budget was a difficult budget for difficult times, and would provide further efficiency challenges for the Northern Ireland Executive.
Kevin Kingston, Chairman of the Ulster Society of Chartered Accountants (USCA), a district society of the Institute of Chartered Accountants in Ireland (ICAI) said: “Perhaps the biggest aspect of Budget 2009 for Northern Ireland is the level of belt-tightening that will take place in the years ahead.
“The announcement of increasing efficiency savings of up to £9billion by 2013 may have the effect of mounting pressure on local departmental budgets and reducing the scope that the Northern Ireland Executive has in terms of planning for economic recovery.
“Our priority must be to sustain and develop the best of what we have in our local economy. To achieve that, we must find a blend of public sector strategic thinking and decisive private sector commerciality. Today more than ever, it is vital that our political leaders and business sector work together to build for economic recovery.”
The Chairman of the ICAI Northern Ireland Tax Committee, Mr Eamonn Donaghy, said: “This is a difficult budget for difficult times, and the increased taxes and duties will affect all taxpayers. The increase in income tax rates to 50% for those earning over £150,000 may be seen by many as a fair way of redistributing wealth, however there is a risk that it might drive the high net worth entrepreneurs out of Northern Ireland to lower tax regimes. This would mean both a loss of their existing tax yield and their future talent to the economy.
“However, it is not all doom and gloom on the tax front. As an Institute which is committed to furthering and developing the Northern Ireland economy, we acknowledge some of the more progressive tax measures announced by the Chancellor in his Budget.
“Since the credit crunch, cash is king for all businesses. The new tax allowance of 40% for machinery will help encourage businesses to spend scarce funds on equipment to develop and grow their business, rather than on paying tax. However there is quite a short window of opportunity to claim this allowance.
“Businesses which were profitable in the past but are now suffering losses due to the downturn will be able to recover some of the tax they paid when times were better. Current losses can now be set off against profits for the previous three years, with a corresponding entitlement to a tax refund.
Mr Donaghy continued: “We note with some relief that the Chancellor has decided to allow most dividends from abroad to be exempt from Corporation Tax for all companies no matter what size. The original plan was to grant tax free status only to larger companies, and this would have prejudiced many smaller Northern Ireland enterprises with business interests in the South.
“The Chancellor has decided to confirm Corporation Tax rates at 28% with a small companies rate remaining at 21% instead of rising to 22%. Whilst the rate hold is welcome, many indigenous Northern Ireland companies pay tax at the small companies rate, and we feel that the opportunity for real business stimulus was missed by not reducing the small companies rate.
“One of the consequences of an economic downturn can be growth in the black economy. HMRC have new powers to clamp down on tax evasion, not least with their new power of naming and shaming taxpayers who don’t comply with the rules. We think however that the threshold for publication - £25,000 of evaded tax – is possibly too low, and that a sanction of this nature should be reserved only for the most serious tax evaders. Naming and Shaming also has more impact and is a more serious matter for citizens in smaller communities with their own active local media outlets, such as we have in Northern Ireland”.
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