On December 5 2001 the Minister for Finance announced the final budget of the present government prior to the next general election, which is due to take place in the first half of 2002.
The rate of corporation tax on trading profits has, as promised, been reduced from 20% to 16% with effect from January 1 2002. It is due to be reduced to 12.5% with effect from January 1 2003. However, the due date for payment of corporation tax is being moved forward. Instead of payment falling due six months after the end of the relevant accounting period, for accounting periods ending on or after January 1 2002 companies must make payment one month prior to the end of the relevant accounting period. Transitional rules will apply until 2007 so as to ease the pain caused by this change.
The standard rate of value added tax will be increased from 20% to 21% with effect from March 1 2002. The rate of stamp duty applicable to investors in residential property was reduced with effect from December 6 2001 to match that applicable to non-first time owner occupiers, in an attempt to boost the supply of rented accommodation.
Two specific industries were also affected by budget changes. A tonnage tax regime has been introduced for shipping activities with effect from January 1 2002. Similar regimes already exist in the UK, Germany and The Netherlands. Following representations from the betting industry, the rate of betting duty will be reduced from 5% to 2% with effect from May 1 2002.
Another notable event in the Irish financial sector occurred in December 2001. The Asset-Covered Securities Act 2001 was signed into law by the President of Ireland on December 18 2001. It now awaits the making of the necessary commencement orders by the Minister for Finance. The Act will create a legal framework for the issue of credit-enhanced asset-backed bonds (similar to German Pfandbriefe) by Irish mortgage and public sector lenders. For further information on asset-covered securities see the September 2001 issue of IFLR.