Finance Minister Paschal Donohoe has unveiled a €17.7bn budget package in the Dáil.
There will be a €3.4bn recovery fund aimed at increasing employment.
The fund will be targeted to boost domestic demand.
As part of the stimulus package, the VAT rate for hospitality will be reduced to 9% from November 1st.
The Temporary Wage Subsidy Scheme (TWSS) or a similar scheme will remain in place to the end of 2021.
Carbon tax will increase by €7.50 a tonne from midnight - but there will be no broad changes to tax credits or tax bands.
The minister also announced some changes to Vehicle Registration Tax aimed at encouraging people to buy low emission cars.
Cigarettes are to go up by 50 cent - bringing the average cost of a packet of 20 to €14.
The budget is framed on the basis of no bilateral trade deal between the EU and the UK for Brexit, as well as the continued presence of COVID-19 with no vaccine.
Finance: Main points
- The total budget package will be €17.75bn - €17bn in expenditure and €270m in taxation
- A deficit of €21.5bn is to be recorded this year
- Some €8.5bn will be spent on public services - including €2.1bn on contingency funding - with capital spending to increase by €1.6bn
- There will be a €3.4bn Recovery Fund be aimed at increasing employment
- A pack of 20 cigarettes will increase by 50c, with a pro-rata increase on other tobacco products
- The Temporary Wage Subsidy Scheme, or a similar scheme, will be needed out to the end of 2021. The Government is to apply to the SURE EU fund to support this
- A new COVID-19 restrictions support scheme is to provide targeted support for businesses that have temporarily closed because of the pandemic
- VAT for hospitality will be reduced to 9% from November 1st until December 2022
- Help-to-buy scheme extended until end of 2021 at the higher max rate of €30,000
- Carbon tax increases by €7.50 a tonne from midnight
- Working from home: If an employer makes no contribution, workers can claim a tax deduction for things such as heat, light and broadband
There will be an extension of the tax warehousing scheme for employers to include those on Temporary Wage Subsidy Scheme - The self-employed can also benefit from this - The Section 481 Scheme for the film industry will run until December 31st 2023 at its highest rate of 5%
- The Knowledge Development Box Relief on intellectual property is being extended until end of December 2022
- Work is to begin on a tax credit for the digital gaming sector from January 2022
- The Accelerated Capital Allowances Scheme for energy efficient equipment is being extended for a further three years
- No broad changes to income tax credits or bands
- Stamp Duty Scheme, which refunds a portion of stamp duty paid on acquisition of non-residential land where it is then developed, will be extended until end of December 2022
- Changes to the motor tax regime: Rates unchanged for those before 2008. Most pollutant cars impacted
- Changes to VRT based on emissions, which is aimed at incentivising people to buy low emission cars
- An extension of Stamp Duty Relief for the transfer of agricultural land to family members until December 2023
- No change to the 12.5% of Corporation Tax
- Change to Capital Gains Tax Entrepreneur Relief so that anyone who has owned at least 5% of the shares for continuous three years will qualify for relief
Expenditure: Main points
- An extra €4bn is being allocated to the health service: This will see an extra 1,146 actue beds, an increase in critical care beds to 321 by end of the year
- There will also be five million extra homecare hours
- €5m for the development of community based dementia supports
- €50m for new drugs and €25m for Healthy Ireland and National Drugs Strategy
- €38m is being allocated for mental health services
- There will be €100m available for new disability services
- There will be €500m in additional expenditure for businesses, in addition to other tax measures
- A commercial rates waiver is being extended for final quarter of this year
- An additional €44m is being invested into Irish Water for infrastructure
- €80m extra is being made available for the School Building Programme, ICT and minor works scheme for the Department of Education
- €270m is being made available for higher education building projects
- An extra €20m is being made available for disability services through the Transforming Lives programme
- €10m in funding for voluntary hospices this year
- €340m of voted expenditure will be spent on Brexit supports in 2021 - including money for ports and airports and 500 staff for customs
- Capital spending is to get another €600m - total capital expenditure will rise to over €10bn for the first time ever
- Ireland has signed up to EU advance purchase agreements for potential COVID-19 vaccines
- The Government is to purchase 41 additional InterCity railcar carriages and sign contract with potential for up to 600 electric carriages as part as DART+
- €131m is to made available for Defence Forces capital expenditure
The Department of Finance is forecasting a total loss of 320,000 jobs in 2020, with a recovery of 155,000 jobs next year.
How will this affect me?
There are a few areas where people will notice a direct impact from Budget 2021.
Firstly, income tax rates are not going changing either up or down in this budget.
But there are a number of areas that will hit your pocket, namely around motoring.
A €7.50 a tonne increase in carbon tax will hike the cost of fuel.
Filling a tank of diesel will cost about €1.50 more, a tank of petrol will add on €1.30.
There will be 90c extra on a bag of coal, 20c on a bale of briquettes and home heating oil is set to increase.
This will be offset for the most vulnerable by increases in the Living Alone Allowance and the Fuel Allowance.
Changes to VRT will make buying a polluting car more expensive - and changes to motor tax means those with older or more polluting cars will end up paying somewhere between €10 and €50 more a year.
Though 90% of people will not be impacted by the motor tax changes.
Full-time, third level students will all be given a €250 cash sum by the Government to help them this year.
And the cost of a pack of cigarettes is going up 50c, but alcohol is being left unchanged.
In short: if you smoke and drive a big, old car this budget will cost you.
But the reality is that despite this being the largest budget in the history of the State, it will not produce a massive change for most people.
