Updated at 8.30pm
THE CABINET WERE given a comprehensive briefing on tax and expenditure for the upcoming Budget by Finance Minister Michael Noonan at today’s weekly meeting.
The Government is planning an adjustment of around €1 billion in the 11 October Budget, split on a ratio of around 2:1 between spending on services and tax cuts.
It’s understood a reduction in Universal Social Charge (USC) is on the cards, but that it won’t be as substantial as the 1% cut that was promised in the Fine Gael general election manifesto.
It’s believed the two lower bands will be cut from 1% and 3% to 0.5% and 2.5% respectively. The higher band is currently being examined by the minister.
Noonan told an Oireachtas committee last week that he had no expectation “that taxpayers will be throwing their hats in the air on Budget night,” saying there were ”a lot of things that are desirable that are not affordable”.
While the USC measures have been well-flagged in recent weeks the Minister also outlined changes to Capital Gains Tax for entrepreneurs today. Capital Gains Tax for new start-ups will reduce to 10%. The Programme for Government commits to the 10% reduction from 2017. This is subject to a €10 million cap on gains.
The threshold for Inheritance Tax for children inheriting the family home is also set to rise from €280,000 to above €300,000.
Estimates
Minister for Public Expenditure and Reform Paschal Donohoe brought a memo to Cabinet last week on estimates.
Totting up the sums, the cost of all ministers’ wants is in excess of €3 billion. However, the government has said an adjustment of just a third of that amount will be made.
Kite-flying
Opposition parties earlier slammed media reports that the Government is planning on enticing emigrants home with tax cuts.
A piece in today’s Irish Independent said the Government will attempt to lure highly-skilled workers from the UK back to Ireland with a special 30% tax rate. This rate would be for those earning €75,000 or more.
The report said the special tax rate could be extended to those in medicine, IT, science and finance. The paper said it was in response to high earners being put off returning home due to the high rate of marginal tax they would have to pay.
At the moment, high earners pay 49% when USC and other taxation measures are taken into account. The plan, it’s reported, would be to drop this to 30% for a period of five years.
Tax breaks
Speaking today, Social Democrat Catherine Murphy told TheJournal.ie:
“We need to sort out the construction industry first. We need to fix housing and the cost of living in Ireland to bring people back.
We need people in medicine, of course, but we also need bricklayers, plumbers and sparks.
“We need to encourage people in the construction sector to come back.
“Unless we get the fundamentals right, we’re going to make it very unattractive for people to relocate.
Housing is either unavailable or unaffordable. Incentives like these are just skirting the edges.
Discrimination
Labour Party jobs spokesman Alan Kelly also slammed the concept.
He said in a statement: “If true, these proposals reported today are preposterous. The idea that workers would be given two different tax rates for doing the same job amounts to a form of discrimination.
Furthermore, workers sitting side by side would have different opportunities to improve their families’ living standards, while being able to better compete for housing and childcare due to their larger income. This is obviously inequitable and unfair.
Budget 2017 is just two weeks away so it comes as no surprise that potential policies are entering the public domain.
This type of kite-flying is sure to continue in the coming 14 days and will give the Government an indication as to how well their proposed ideas will go down.
The office of Jobs Minister Mary Mitchell O’Connor was approached for comment on the Irish Independent’s report this afternoon but did not respond to queries. TheJournal.ie understands the initiative was not presented to Cabinet for approval and was not discussed at today’s Cabinet meeting.
Independents
Independent Alliance Cabinet members are due to meet tomorrow to discuss what items are top of their list for this year’s Budget.
Members of the group have yet to reach a consensus in relation to what they want delivered on 11 October. It’s believed members will choose two or three issues to call their own in this year’s Budget.
Conversations with Ministers Noonan and Donohoe are ongoing.
- With reporting from Garreth MacNamee
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