International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Sponsored

The impact of Ireland’s Budget 2023 on sustainability

Sponsored by

Sponsored_Firms_deloitte.png
hydrogen-6222031.jpg

Brian McDonnell of Deloitte Ireland provides an overview of the supports and schemes announced as part of Ireland’s Budget 2023, and calls for further measures regarding green energy and renewables.

Ireland’s Budget 2023 had the unenviable task of attempting to address the challenges and global economic uncertainties arising from exiting the COVID-19 pandemic and the ongoing conflict in Ukraine. These have contributed to slowed economic growth and increased inflation, impacting on the availability and cost of multiple resources and commodities, especially energy.

As such, protecting businesses and taxpayers from spiralling energy costs was a key focus, with Budget 2023 described by the finance minister as a “cost of living budget”. For businesses, the budget featured the announcement of two schemes of note:

  • The Temporary Business Energy Support Scheme (TBESS); and

  • The Ukraine Enterprise Crisis Scheme.

Temporary Business Energy Support Scheme

This is a scheme focused on supporting SMEs that have experienced significant increases in gas or electricity costs. €1.25 billion ($1.23 billion) is allocated to the TBESS. It specifically applies where costs have increased by more than 50% compared with an average price in 2021. Administered by Revenue, the scheme will be self-assessed. Qualifying businesses will be able to claim up to 40% of the increased costs, up to €10,000 per month. Once operational, claims can be backdated to September 2022 and it will run until the end of February 2023.

Ukraine Enterprise Crisis Scheme

Budgeted at €200 million, this scheme focuses on supporting larger, internationally trading and manufacturing companies that are viable but vulnerable due to increased energy costs. The scheme will be administered through Enterprise Ireland, IDA (Ireland’s foreign direct investment agency), and Údarás na Gealtachta (a regional state agency responsible for the economic, social, and cultural development of Irish-speaking regions of Ireland). It is to be made up of two measures.

Measure 1 is targeted to support companies that have experienced a 15% reduction in operating surplus in 2022 versus 2021, due to increased input costs and supply chain difficulties. The aid will be in the form of grants, payable advances, equity and loan notes to ensure liquidity within a range of €20,000 to €500,000.

The second measure is focused on supporting energy-intensive companies; i.e., those that spend more than 3% of their turnover on energy. These companies must meet the conditions set out in Measure 1 and have experienced a doubling of their unit cost price in 2022 versus 2021. Aid will not exceed 30% of eligible costs and applicants will have claims of no less than €20,000 and no greater than €2 million. Applicants must also demonstrate measures undertaken or planned to improve energy efficiency.

Increased government intervention needed

These schemes do little to augment industry behaviours and encourage a meaningful transition to more sustainable production processes. Given the significant increases in energy costs and the uncertainty in energy supply, government intervention is necessary to support vulnerable businesses.

Furthermore, the budget did little to address Ireland’s climate action requirements. There was a noticeable lack of measures to help companies to reduce their energy needs or to promote investment in new and reliable renewable energy generation. Such measures will be critical if Ireland is going to achieve a 51% reduction in greenhouse gas emissions by 2030 and become climate neutral by 2050. It is committed to EU effort-sharing regulations on this pathway.

However, the latest Environmental Protection Agency data showed a 4.7% increase in greenhouse gas emissions in 2021 versus 2020. The increase is largely attributed to the partial lifting of COVID restrictions on transport. A 245.5% increase in coal used in electricity generation contributed to a 17.6% increase in energy industries emissions during the period. These increases highlight the challenges faced in trying to balance a functioning economy with the transition to renewable energy infrastructure.

In a pre-budget article, Deloitte called for further enhancements to a range of tax incentives and reliefs targeted towards green energy and renewables. Such measures would reward and encourage companies to modify behaviours and adopt more sustainable practices. The reintroduction of reliefs for green investments, an extension of tax relief for specific expenses incurred on renewable energy projects, and the use of VAT measures would ease the cash flow burden on renewable energy developers. This would help to accelerate the creation of sustainable, consistent, and reliable energy infrastructure.

While the measures adopted in the budget are necessary and will mitigate some of the increased energy costs for taxpayers, they are short term and fail to encourage investment in sustainable energy production, reduction technologies, or practices that will have a long-lasting impact. As a nation, Ireland lags behind its national and EU emissions targets. The measures adopted in the budget will potentially result in an increase in energy consumption and may further impact and delay Ireland’s progress towards its climate commitments. Further incentives and investment are needed to meet its targets and to develop Ireland’s potential as a leading producer of renewable energy.

more across site & bottom lb ros

More from across our site

Two months since EU political agreement on pillar two and few member states have made progress on new national laws, but the arrival of OECD technical guidance should quicken the pace. Ralph Cunningham reports.
It’s one of the great ironies of recent history that a populist Republican may have helped make international tax policy more progressive.
Lawmakers have up to 120 days to decide the future of Brazil’s unique transfer pricing rules, but many taxpayers are wary of radical change.
Shell reports profits of £32.2 billion, prompting calls for higher taxes on energy companies, while the IMF warns Australia to raise taxes to sustain public spending.
Governments now have the final OECD guidance on how to implement the 15% global minimum corporate tax rate.
The Indian company, which is contesting the bill, has a family connection to UK Prime Minister Rishi Sunak – whose government has just been hit by a tax scandal.
Developments included calls for tax reform in Malaysia and the US, concerns about the level of the VAT threshold in the UK, Ukraine’s preparations for EU accession, and more.
A steady stream of countries has announced steps towards implementing pillar two, but Korea has got there first. Ralph Cunningham finds out what tax executives should do next.
The BEPS Monitoring Group has found a rare point of agreement with business bodies advocating an EU-wide one-stop-shop for compliance under BEFIT.
Former PwC partner Peter-John Collins has been banned from serving as a tax agent in Australia, while Brazil reports its best-ever year of tax collection on record.