Ned Kelly
14-10-2008, 11:49
Government to impose income levy
12 October 2008
By Ian Kehoe, Pat Leahy and Niamh Connolly
Taxpayers will be hit with a special levy on incomes in the budget on Tuesday.
The levy will be a key revenue-raising measure in a tough budget, which will also reduce the €1,100 annual payment to parents for each child under six years of age and flag a redundancy programme across the public service.
While the budget will only be finally signed off tomorrow, senior ministers are set to opt for the imposition of a temporary levy on PAYE and self-employed incomes, rather than a rise in the top 41 per cent income tax rate.
This new levy is expected to be a 1 per cent charge on income above a certain earnings threshold, with the possibility of a higher charge for top earners.
It would have a similar impact as an increase in income tax rates, but have the political advantage of being presented as a temporary measure to be removed when the exchequer finances improve. The government is imposing significant cuts in public spending, with total spending in all areas set to rise by less than 2 per cent next year.
Brian Lenihan, the Minister for Finance, will signal sweeping reforms through the imposition of a new redundancy programme across the public service. Pay cuts for government ministers are also expected to form part of the package.
Social welfare rates will be increased in line with, or slightly ahead of, expected inflation of around 2.5 per cent.
However, the early childcare supplement, currently paid in four quarterly instalments to parents of all children under six, will be reduced as a key measure to save revenue in this area.
The public will also face higher charges in areas of the health service and education to help fund spending in these areas.
Even with the tightest spending controls seen for many years, Lenihan will still have to raise substantial extra revenue. Informed sources said that the government was also giving serious consideration to a major restriction of pension tax relief.
At the moment, higher earners can claim relief at the top 41 per cent income tax rate on pension contributions. Cutting this relief, possibly to the standard income tax rate of 20 per cent, would save a significant sum. Another option would be to impose further restrictions on the total amount which could be claimed for pensions relief.
A carbon tax is not expected to form part of the budget package, but Lenihan may make a commitment to introduce it in the 2010 budget.
However, excise duties will increase across the board and there is strong speculation of a new airport departure charge. Ministers believe that tough measures now will position the economy for a recovery in 2010.
The pre-budget White Paper published this weekend shows spending will fall in many departments in cash terms, with the vast bulk of the extra money allocated going to higher social welfare payments.
This indicates that major cuts will be announced in many departments, with widespread merging and abolition of quangos, cuts in job numbers and major pressures on non-pay spending.
The government will aim some modest stimulus at the housing market.
An expanded local authority loan programme will be targeted at helping first-time buyers and new rules will allow some people to rent before they buy. Extra tax relief may also be aimed at first-time buyers.
There is also speculation of a reduction in commercial stamp duty from 9 per cent to 4 per cent. A summer work scheme, which was axed in 2006, is to be reintroduced to provide school building work.
12 October 2008
By Ian Kehoe, Pat Leahy and Niamh Connolly
Taxpayers will be hit with a special levy on incomes in the budget on Tuesday.
The levy will be a key revenue-raising measure in a tough budget, which will also reduce the €1,100 annual payment to parents for each child under six years of age and flag a redundancy programme across the public service.
While the budget will only be finally signed off tomorrow, senior ministers are set to opt for the imposition of a temporary levy on PAYE and self-employed incomes, rather than a rise in the top 41 per cent income tax rate.
This new levy is expected to be a 1 per cent charge on income above a certain earnings threshold, with the possibility of a higher charge for top earners.
It would have a similar impact as an increase in income tax rates, but have the political advantage of being presented as a temporary measure to be removed when the exchequer finances improve. The government is imposing significant cuts in public spending, with total spending in all areas set to rise by less than 2 per cent next year.
Brian Lenihan, the Minister for Finance, will signal sweeping reforms through the imposition of a new redundancy programme across the public service. Pay cuts for government ministers are also expected to form part of the package.
Social welfare rates will be increased in line with, or slightly ahead of, expected inflation of around 2.5 per cent.
However, the early childcare supplement, currently paid in four quarterly instalments to parents of all children under six, will be reduced as a key measure to save revenue in this area.
The public will also face higher charges in areas of the health service and education to help fund spending in these areas.
Even with the tightest spending controls seen for many years, Lenihan will still have to raise substantial extra revenue. Informed sources said that the government was also giving serious consideration to a major restriction of pension tax relief.
At the moment, higher earners can claim relief at the top 41 per cent income tax rate on pension contributions. Cutting this relief, possibly to the standard income tax rate of 20 per cent, would save a significant sum. Another option would be to impose further restrictions on the total amount which could be claimed for pensions relief.
A carbon tax is not expected to form part of the budget package, but Lenihan may make a commitment to introduce it in the 2010 budget.
However, excise duties will increase across the board and there is strong speculation of a new airport departure charge. Ministers believe that tough measures now will position the economy for a recovery in 2010.
The pre-budget White Paper published this weekend shows spending will fall in many departments in cash terms, with the vast bulk of the extra money allocated going to higher social welfare payments.
This indicates that major cuts will be announced in many departments, with widespread merging and abolition of quangos, cuts in job numbers and major pressures on non-pay spending.
The government will aim some modest stimulus at the housing market.
An expanded local authority loan programme will be targeted at helping first-time buyers and new rules will allow some people to rent before they buy. Extra tax relief may also be aimed at first-time buyers.
There is also speculation of a reduction in commercial stamp duty from 9 per cent to 4 per cent. A summer work scheme, which was axed in 2006, is to be reintroduced to provide school building work.