Tax increases and benefit cuts on way to satisfy EU-IMF – All Hail The Austerity – its for your benefit
independent.ie
A RAFT of tax and duty hikes, along with benefit cuts for the elderly, is on the way in this year’s Budget.
Finance Minister Michael Noonan has outlined details of his plans in papers sent to the EU-IMF bailout team.
The documents, which were released last night, show that the Government plans to increase taxes on cars, drink and cigarettes and to bring more people into the income tax net than before.
The plans will deal a further hammer blow to household finances, which have already been stripped to the bone by a series of swingeing Budgets.
Benefits for the elderly will be cut after spending in this area repeatedly triggered alarm bells with the EU-IMF.
There will be no increase in pensions after Mr Noonan pledged to introduce reforms to “contain ageing-related spending pressures”.
There will also be pressure on pensions savings if the Government moves to further reduce tax relief for those who save for their retirement.
Mr Noonan’s letter, known as a memorandum of understanding, admits that the Government is concerned about overspending in Health.
It says Health Minister James Reilly will be forced to present more specific details on measures to cut overspending in his department.
The Government also promises that it will reveal details of exactly how the new property tax will function by the time the Budget is unveiled in December – and then get the Personal Insolvency Bill passed a month later.
The new ‘value-based property tax’ is just one of five tax-raising measures that are set to raise €1.25bn in the Budget.
Also listed are:
- Cutting back of tax reliefs
- Higher motor tax
- Increased excise duty and other indirect taxes
- A widening of the income tax base.
The property tax is likely to be set at an average of around €300 a home. This will raise around €500m a year. The document does not specify what extra income taxes are set to be imposed. Finance experts said yesterday that the Government could gather more income tax by hiking pay-related social insurance (PRSI) or lowering the tax bands.
This would mean that more people on lower incomes would end up in the tax net. Meanwhile, workers earning more would end up paying the higher rate of 41pc on a larger chunk of their incomes.
The commitment to cut back on tax reliefs could see further pressure on pensions savings. These are already under pressure due to people earning lower incomes, as well as the Government’s levy on private pensions and tougher rules for company schemes.
Benefits for the elderly face further cuts, despite the Government having already reduced the household benefits package, which is worth up to €800 a year off pensioners’ heating, TV licence and telephone bills. Meanwhile, Mr Noonan promises to take aim at the rest of the social welfare budget with a raft of measures aimed at tackling long-term unemployment. There will be “social expenditure reductions” and the Government is reviewing plans to hire private companies to help the long-term unemployed back into work.
A new “housing assistance payment” will replace rent supplement within months, so that rent supplements no longer act as an incentive for people to remain on the dole.
Turning to the public sector, Mr Noonan says overtime has been targeted and claims that the redeployment of staff “is gathering pace”. Further cost savings on sick pay and allowances are planned.
The Government’s plans to sell Bord Gais, along with a stake in Aer Lingus, and the trees on Coillte’s lands appear to be on track, with no regulatory or legislative obstacles.
Pensions
Turning to the broader economy, the memo reiterates that the Government expects to slash borrowing to less than 3pc of gross domestic product (GDP) by 2015 and avoid begging for a new bailout if it can reach agreement on restructuring Permanent TSB and find some mechanism to cut the costs associated with the bailout of Anglo Irish Bank.
Neither problem has yet been solved. But credit ratings agency Moody’s said yesterday there was a long way to go before Ireland cuts its deficit from 8.3pc this year to 3pc of GDP in 2015. It also warned that the economy would grow by just 0.2pc this year – less than a third of the Government’s forecast. New official forecasts are due in October.
- Thomas Molloy, Charlie Weston and Michael Brennan
Read More : independent.ie
2012-08-25 04:21:30
Source:
