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Archive for September, 2018

Economy set to grow by 9% this year

Thursday, September 27th, 2018

The economy could grow by as much as 8.9% this year, according to the Economic and Social Research Institute — nearly double the level initially expected.

The forecast is a significant increase on the 4.7% rise the ESRI said it was expecting as recently as mid-June. The reason for the higher growth outlook, it said, is faster-than-expected domestic economy growth and multinational activity significantly impacting Ireland’s trade balance.

“Domestic consumption and modified investment have grown at a faster pace through the first half of 2018 than was previously expected,” the economic think-tank said in its latest outlook report.

“Secondly, considerable volatility in the trade balance, with imports registering negative growth over the same period, has also led us to revise our forecasts. This change is mainly due to a sizeable reduction in imports of research and technology-related services amongst certain multinational firms.”

Noting that the trade balance makes a significant contribution to economic growth, the think-tank said “significant risks” — mainly in the form of Brexit and US trade policy — are looming. It said global risks are likely to be “particularly elevated” in 2019.

The ESRI has also upped its outlook for 2019. It now expects 4.5% GDP growth instead of less than 4%. Exports should grow by 7.5% this year and by 5.2% next, it said, with consumption up by 2.9% in 2018 and 2.5% in 2019.

It expects the unemployment rate to be at 5.7% by the end of this year and to fall to 5.1% by the end of 2019.

“Our forecasts for 2019 are subject to the technical assumption that an agreement along the lines of the European Economic Area will exist between the UK and the EU after March 2019,” said the ESRI.

It warned against “an explicitly contractionary budget” next month, which, in the case of a no-deal Brexit, “may amplify the potential fallout from an economic downturn and reinforce the shock on the economy, rather than insulate it”.

Elsewhere in its outlook, the ESRI said it expects house build completions to total 18,550 this year and 24,500 new houses to be built next year. It also expects upward pressure to continue on both house prices and rental costs. Affordability difficulties are likely to be exacerbated as a result.

Noting new mortgage lending levels remaining in double-digit percentage growth and a rise in SME lending, the ESRI said “careful monitoring is required”, given the pace of acceleration in new lending.

“The Irish economy continues to perform significantly better than most OECD economies and is, once again, likely to register the fastest growth rate in the euro area in 2018,” it said.

Large numbers of SMEs yet to prepare for payroll shake-up

Friday, September 14th, 2018

Large numbers of smaller firms have admitted they are not prepared for changes in how payroll systems interact with Revenue that are due to come into force in January. An overhaul of the Pay As You Earn (PAYE) system is due to come into effect in five months.

But 40pc of firms are not prepared for the changes, according to a survey of 200 firms which was commissioned by Big Red Cloud, a firm that supplies payroll software. A majority of the firms surveyed said they were short of detail on how the new PAYE system will work.

From January, the new system will see employers submitting payroll data on a regular basis. This represents a fundamental shift from the present system where detailed payroll data is submitted annually in a P35 form.

Big Red Cloud said Revenue’s changes are warranted, given the fact that the existing PAYE system had been introduced in 1960, at a time when a job was typically for life and payroll was a manual process. Every aspect of how an employer fulfils their PAYE reporting obligations will change to a real-time electronic submission of the data.

That covers everything from commencing employment, statutory deductions (PAYE/PRSI/USC), as well as the cessation of employment. Well-known forms, such as the P45, P46, P30, P60 and P35, will disappear.

The survey found that 66pc of small and medium-sized firms are “short on detail” on the PAYE system overhaul. Just 5pc are “completely unaware” of the changes. But 40pc of SMEs said they are “not prepared at all” for the January 1 modernisation deadline. And just 15pc say they are confident they will be ready.

Big Red Cloud CEO Marc O’Dwyer said the Revenue changes represent a huge overhaul of the PAYE system, the first in 58 years. “As the year progresses, it is becoming increasingly apparent to us that, not only are many businesses not ready, many are simply unaware and/or uninformed of the changes and what they will mean for their business,” he said.

He added it was important that owner/managers take the necessary steps over the next few months to ensure their business is Revenue-compliant by January.

Revenue Commissioners chairman Niall Cody said recently the modernising of the system and move to real-time PAYE “represents an important step in the process of continuous improvement in service, compliance and efficiency in our administration of the tax system”. He said that improvements and efficiencies will be the end-goal but “businesses, particularly those at the smaller end of the scale, will need some help to get there”.