USC cut for 1.2 million in Budget tax package
Balanced books for first time in a decade as Donohoe ‘finds’ €1bn in corporation tax
THE hated USC is to be cut for almost 1.2 million people in Tuesday’s Budget.
Workers can expect to get tax breaks worth around €5 a week in what will be the first balanced budget since 2007.
As the final numbers for Budget 2019 were being crunched last night, Finance Minister Paschal Donohoe found an extra €1bn in unexpected corporation tax.
Half of this will be used to start a ‘Rainy Day Fund’, while another chunk will help plug a €700m black hole in the Department of Health.
The Irish Independent can reveal Fianna Fáil has secured a 0.25pc reduction in the 4.75pc rate of USC applied to income between €19,000 and €70,000. The Budget will also include a €5 increase to all social welfare payments, including the pension.
A new Affordable Housing Scheme could also see homes come on the market in Dublin for €240,000.
Budget 2019 will also include:
:: A €130 cap applied to how much a family can spend on prescription medicine in a month;
:: A €300 rise to the Home Carer’s tax credit;
:: An extra €45m for the NTPF to tackle hospital waiting lists;
:: Top-up payment for parents reliant on social welfare;
:: A 2pc reduction in tax on savings;
:: The doubling of gambling tax to 2pc;
:: A hike in diesel prices; :: An increase in the fuel allowance.
The details of a new Affordable Housing Scheme are still being worked out between Mr Donohoe and Fianna Fáil.
However, sources have indicated that, under the initiative, a couple in Dublin would be able to buy a house for approximately €240,000. The figure will be lower in some parts of the capital and the regions where the pressure on prices is not as extreme.
Local authorities will be expected to build around 4,000 homes in a move that could amount to a State subsidy worth around €50,000 to the buyer.
Fianna Fáil’s finance spokesman Michael McGrath said yesterday that while negotiations were ongoing his party was trying to get the Budget over the line “without any drama”.
“Fianna Fáil’s influence on this Budget will be measured by our delivery on housing,” he said.
He said the party’s second priority was health, followed by ensuring that workers got some payback through USC cuts.
Sources last night confirmed that the USC element of the Budget has now been agreed. When combined with a Fine Gael pledge to raise the point at which workers pay the higher rate of income tax, it
will mean that somebody earning €50,000 will be around €230 better off next year.
However, much of those gains will be taken back through revenue raising measures, including a hike to the special 9pc VAT rate for the hospitality sector. Sources say that, despite massive objections from the Independent Alliance, Mr Donohoe is determined to return the hospitality VAT rate to 13.5pc.
Carbon taxes are also expected to be hiked. If the minister increases carbon tax to €30 per tonne, it would add around 3c to the price of a litre of petrol and diesel.
There will be mixed news for farmers, who have been campaigning for a new €200 payment for suckler cows. The idea had support from Fianna Fáil, but Mr Donohoe has ruled the payment out.
The Budget will allow for major changes to the Fair Deal scheme that will benefit farmers and small business owners.
Under the existing regime, farm families are required to set aside 7.5pc of the value of their land annually to fund a place in a nursing home.
From next year, this bill will be capped at three years, giving farmland and business assets the same status as the family home.
The Department of Finance published a White Paper that revealed that corporation tax receipts are massively ahead of target due to changes in international accounting standards.
By the end of the year, an unexpected €1bn will have been paid in corporation tax, mostly by multinational companies.
Some €700m of this will not be repeated next year and has been classified by Revenue as a ‘windfall’.
“We have to be very, very cautious regarding the use of these receipts,” said Mr Donohoe, who plans to funnel €500m into a new ‘Rainy Day Fund’ which was originally going to be set up using borrowed money. “Next year we will be fully balancing our books,” the minister said.