Middle-income earners in Budget tax cut blow
Donohoe’s paltry tax package likely to alienate Fine Gael hard-working base
A €350m Budget tax package will see small cuts to the Universal Social Charge (USC) and minor tweaking widening of tax bands for middle income earners, the Sunday Independent can reveal.
There will also be moves to reduce cost of living expenses such as prescription charges and drug costs. Fianna Fail is also understood to be demanding €100m in funding to reduce waiting list times for hospital surgeries.
However, despite a booming economy and a sharp rise in employment, hardworking families are set to be disappointed by Finance Minister Paschal Donohoe’s tax cuts which will only result in meagre income increases.
Fianna Fail and Fine Gael have not finalised how the tax cuts will be distributed, however, a source close to the negotiations said the final package will amount to up to €350m in tax reductions. Last year, the Government’s tax plan amounted to €400m in exchequer funding.
Mr Donohoe’s paltry tax package is likely to alienate Fine Gael’s hard-working taxpayer base who feel they have been forced to bear the burnt of the economic downturn and have still not being rewarded for their efforts.
Fianna Fail finance spokesman Michael McGrath yesterday said his party had not finalised negotiations on tax but insisted USC cuts will be part of the final package.
“Our Confidence and Supply agreement also provides for reductions in the USC. We have achieved USC reductions in the last two budgets and are continuing negotiations to ease the USC burden further in this Budget,” Mr McGrath said.
He said the party’s “overarching priority” is to finally tackle the crises in housing and health, and to step up preparations for Brexit.
Mr Donohoe has insisted in a number of speeches he is focused on increases on the entry point for the top rate of tax to ensure Ireland can compete with other low tax countries after Brexit.
Department of Finance officials were this weekend seeking to establish how the money for tax cuts can appease all the political fractions involved in Budget negotiations.
Official Revenue Commissioner figures show reducing 4.75pc USC rate by a percentage point would cost €408m. Increasing the entry point a single person paying the 40pc rate of tax from €34,550 to €36,050 would cost €130m. The same increase for a married couple would cost €47m in a full year.
The Department of Finance’s tax strategy group said ‘pinching’ the 4.75pc USC rate band by increasing in the entry point by €3,500 to €22,872 and decreasing the ceiling by €2,000 to €68,044 would cost around €350m.
A 0.5pc cut to the lower 20pc rate of income tax or a reduction in the 8pc rate of USC to 5pc would also cost €350m.
A number of revenue raising measures are expected to be introduced in the Budget.
The 9pc Vat rate for the tourism industry is likely to be increased to 13.5pc. However, it may be tweaked to exclude some hotels and other sectors benefiting from the tax break.
A form of carbon tax is also expected to be introduced, which will ensure Ireland meets environmental demands set out in EU regulations.
An increase in betting taxes is also on the table after being perused by Independent Alliance Minister John Halligan.
Meanwhile, a row is set to erupt between the Alliance and Fine Gale over a demand for property tax exemption for all pensioners on fixed income. Transport Minister Shane Ross is understood to have told Fine Gael negotiators he wants to ensure property tax does not become a burden on homeowners when changes are introduced next year.
He is also insisting on property tax changes being announced around the same time as the Budget.
The Alliance is also looking for paid leave for workers who want to take time off to care for elderly or sick parents.
The group of Independent ministers is also looking for changes to the fair deal scheme which would allow older people keep money raised from renting their homes while they are in care.
They are also looking for a grant which allows older people help to convert their houses into separate homes.
The funding would allow them to convert their homes into downstairs living spaces for themselves and a selfcontained apartment upstairs that can be rented.
Budget negotiations will continue this week between Fine Gael and the Alliance.