Brian Cowen (Laois-Offaly, Fianna Fail)

Over 97% of Irish companies will have the benefit of this simpler and more straightforward system. It will help them to get on with their business without putting the State's cash flow at risk. I am also introducing measures proposed by Revenue whereby new start-up companies will not have to pay preliminary tax in respect of their first accounting period. In addition, I have asked Revenue to explore further opportunities to reduce the tax compliance burden on all firms, large and small.

The annual VAT cash accounting threshold for small firms is being raised from €635,000 to €1 million from 1 March 2007 to simplify administration and reduce working capital requirements. This allows smaller firms to pay VAT on receipt of payment rather than at the time a sale is made. The small business VAT registration turnover thresholds are being increased from €27,500 per year for services and €55,000 per year for goods to €35,000 and €70,000, respectively, from 1 March 2007. This measure could take up to 8,000 businesses out of the VAT system and will considerably reduce their administrative burden. The frequency of VAT payments for smaller firms is being reduced from six VAT returns to three each year in some cases and to two each year in other cases. This will provide a cash flow boost to firms and significantly reduce compliance costs. The transaction threshold which triggers the requirement for a tax clearance certificate is being increased from the current €6,500 to €10,000.

The details of all these measures are contained in the Summary of Budget Measures. The full year cost of these measures is €53 million, with an additional once-off cash flow cost in 2007 of €124 million. This will reduce the regulatory burden and enhance the competitiveness of companies whose well-being is critical to our continued success.

R&D tax credit

I am also enhancing the existing research and development tax credit for firms so as to promote research and development spending in our manufacturing sector. Details are in the Summary of Budget Measures. We must act now to promote as many jobs as possible in the productive sector throughout the State. Investment in research and development is a key factor in retaining our manufacturing base. The special research and development tax credit seeks to encourage this and the changes I am making will further incentivise firms to engage in research and development. These improvements will cost €70 million in a full year and will complement Government spending on science, technology and innovation, which will increase from €800 million in 2006 to €900 million in 2007.

Conferences

In recent years, hotel and tourism bodies have made a strong case to introduce a VAT measure specifically for conferences, which will allow deductibility of accommodation expenses on a ring-fenced basis to be competitive in this sector. I am now bringing in such a measure which should greatly help that sector to promote growth in the important conference business and benefit the entire country. This is in recognition of the importance of tourism, one of the country's largest indigenous industries. Details of the scheme will be set out in the Finance Bill.

Sporting bodies

Sport plays a major role in all aspects of Irish life, commercial and social. In recognition of this, there are specific income tax and capital gains tax exemptions in the tax code for sporting bodies. I propose to include in the Finance Bill 2007 a similar exemption from stamp duty where such sporting bodies purchase land for the purpose of promoting sports.

Protecting the Environment

Environmental measures

The environment is a concern for us all, but this concern is not addressed merely by announcing policies. It is a matter of practical measures, targets and actions that have a real effect. It is also a matter of achieving a balanced impact on society. Our economic success in recent years has brought with it environmental pressures through increased consumption levels, waste and energy demands. However, we have been working to minimise the impact of these measures and enhance the quality of our environment.

The recent Stern review in the UK highlighted that climate change is one of the most pressing global economic and environmental challenges we face. Ireland supports the international effort to address this challenge and is playing its part in the co-ordinated global response. We will meet our Kyoto target, mainly through reductions in greenhouse gas emissions in our economy, but also through contributing to the cost of projects to reduce emissions elsewhere in the world.

The Government has indicated its intention to purchase up to 18 million tonnes of carbon allowances in respect of the Kyoto commitment period from 2008 to 2012. I provided an initial €20 million in last year's budget and just recently the Dáil approved the investment of this money in emission-reduction projects in the emerging economies in eastern Europe.

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