Business Plus

Climate Measures Get A Cool Reception

Budget 2024 is missed opportunit­y for green agenda, writes

- John Kinsella Daryl Hanberry agrees

Budget 2024 is the first climate negative budget since the government began measuring the green impact of budgets, in 2022. According to Paul O’Brien at KPMG, the climate positive impact of the measures introduced is outweighed by the extension of the 9% VAT rate for gas and electricit­y for an additional 12 months, and the extension of the temporary excise rate reduction for diesel and petrol cars until March 2024.

“In the accompanyi­ng analysis provided by the Department of Finance, it is noted that these climate negative budget measures are short-term, and designed to address cost-of-living concerns, whilst the climate positive measures should have more long-term impact,” says O’Brien.

Paul Rodgers at PwC commented that it is disappoint­ing the Finance Bill does not contain more targeted, immediate measures to mobilise private investment in sustainabl­e innovation and to drive the decarbonis­ation of the economy. Instead, many existing schemes have had their terminatio­n dates extended.

In the PwC analysis the key climate measures introduced in Finance Bill 2023 include:

BIK exemptions on electric vehicles of up to €45,000 will continue to apply until 31 December 2024, with reduced tapering relief then applying for periods up to and including 2027. Extension of the vehicle registrati­on tax relief for battery electric vehicles from the end of 2023 to 31 December 2025. Accelerate­d capital allowances (ACAs) for energy-efficient equipment are extended by a further two years to 31 December 2025. Increase in the exemption from income tax, PRSI and USC from €200 to €400 per annum for profits and gains related to the domestic generation of electricit­y which is sold to the grid.

Landlords of certain private rental properties which were previously subject to rent controls are now eligible to claim an income tax deduction for qualifying retrofitti­ng expenditur­e. This is subject to a limit of €10,000 per property for a maximum of two properties. Confirmati­on of the annual increase in carbon tax by €7.50 (up from €48.50 to €56) per tonne of carbon dioxide emitted, from 11 October 2023 for auto fuels and from 1 May 2024 for all other fuels.

Zero rate of VAT on supply and fitting of solar panels extended to primary and post-primary schools from 1 January 2024.

Most tax experts believe that in regard to climate goals of reducing carbon emissions, Budget 2024 was a missed opportunit­y. Colm O’Callaghan at PwC Private believes it is “a stark reality” that Ireland will simply not meet its carbon budget targets unless urgent action is taken.

“The adoption of the Temporary Crisis and Transition Framework at an

EU level has provided the government with a window until the end of December 2025 to introduce additional grants and tax incentives with our climate goals in mind,” O’Callaghan adds. “We can and should do more to help enterprise­s reduce emissions.”

However, Marty Murphy at IFAC cautions that additional studies are required to make sure equipment that has already had a carbon cost is not being replaced for efficient equipment that has a higher carbon cost of production rather than the existing equipment running out of its useful life.

Derek Henry at BDO would like to have seen accelerate­d capital allowances for retrofitti­ng of buildings, micro and large-scale renewable energy generation plant, and electric vehicles and infrastruc­ture such as charging points. Henry also favours incentives for investment in sustainabl­e technology businesses, such as enhanced R&D tax credits, enhanced EIIS, preferenti­al CGT regime, and reduced corporate tax and VAT rates.


that spending on green technology and buildings with recognised accreditat­ion should be incentivis­ed by way of super deductions or ACAs. He also notes that until 2014 the tax code provided for a corporate tax relief for equity investment in companies involved in renewable energy generation. ”One suggestion is that this relief be re– introduced to encourage corporate shareholde­rs to invest in renewable energy projects, with some tweaks to allow relief against income or gains taxed at the higher rates of tax.”

Aidan Meagher at EY believes tax measures to drive change need to be more punitive than currently in place. “Carbon tax is still not at a high enough level to drive serious concerted change, and the incentives available need to be more generous, especially when seen in the context of the internatio­nal landscape,” says Meagher. “The introducti­on by the EU Carbon Border Adjustment Mechanism from 1 October 2023 on a transition­al basis, to a small group of products, may pave the way for a wider mechanism to track carbon usage and influence behaviours.”

Grant Thornton’s Sarah Meredith references changes introduced to EU VAT legislatio­n in 2022 that extended the breadth of the goods and services to which a lower rate of VAT may apply. This allowed the reduction in the VAT rate applicable to the supply and installati­on of solar panels. “Further amendments could be adopted by lowering the VAT rates applicable to the supply and installati­on of solar boilers and heat pumps in residentia­l buildings, electric bicycles, waste treatment and recycling services,” Meredith suggests.

Frank Greene at Mazars favours the introducti­on of a double deduction for corporatio­n tax for environmen­tally-friendly business expenditur­e for a five-year period, and granting individual­s tax reliefs on energy-rated equipment and solar panels. “Tax supports are a well-developed tool to orientate people and businesses down a certain path,” says Greene.

RBK’s Fiona Murphy believes the enhanced R&D tax credit may incentivis­e corporate green efforts. “In driving down carbon emissions, businesses are investing staff time and money in developing new processes and procedures,” she explains. “This may result in new innovative ways of how they, for example, manufactur­e their product, and they may be able to avail of the R&D tax credit.”

Bryan Farrell at Walsh O’Brien Harnett would like to see a clearer roadmap around electric vehicle incentives. “Recent changes to the BIK and capital allowances rates for the use of electric vehicles have created uncertaint­y for business owners,” says Farrell. “A clear incentive for the BIK arising on electric vehicles with a definitive life span, such as a specified lower rate of BIK for five years, would allow businesses to make investment decisions with clarity as to the future tax treatment.”


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