Unions say no room for tax cuts next year

Ictu budget submission urges that water charges be restricted to high-income homes

Ictu general secretary David Begg said there should be restrictions on water charges. Photograph: Aidan Crawley/The Irish Times

Ictu general secretary David Begg said there should be restrictions on water charges. Photograph: Aidan Crawley/The Irish Times

Thu, Jul 17, 2014, 12:27

There is no room for tax cuts next year while water charges should be restricted to households with a gross income of more than €80,000, the trade union movement has said.

The Irish Congress of Trade Unions (Ictu) in its pre-Budget submission, has also proposed that the Government should introduce refundable tax credits, invest in a significant social and affordable housing programme and put in place a new “millionaires’ tax”.

Ictu general secretary David Begg said a net adjustment of €800 million - rather than the current official figure of €2 billion - would be required to reach the Government’s target of bringing the deficit in the public finances down to 3 per cent next year.

He said he did not agree that the bulk of the adjustment should continue to fall on cuts to public spending.

The trade union movement has proposed:

*a net budgetary adjustment of €800 million based on reforms to tax expenditures, increased employers’ PRSI on incomes over €100,000, increased excise duties on tobacco, sugar, salt and saturated fat, a tax on online betting, reform of capital acquisitions tax as well as the introduction of a net wealth tax;

*an increase of €400 million in social spending to be invested in social housing, improvements in the household benefits package, mental health services and various community supports;

*a ‘off-book’ investment package - funded through the Strategic Investment Fund - a substantial proportion of which should be allocated for social housing

Mr Begg said there was no room for tax cuts in 2015 as any such cuts would have to be funded by a tax increase elsewhere.

“While there is no room for an overall cut in taxes in Budget 2015 tax reform in the shape of refundable tax credits would be beneficial on employment and equity grounds. On the other hand an increase in the standard rate tax band or a reduction in the marginal income tax rate would be a highly inefficient way of increasing aggregate demand, would not benefit the majority of PAYE taxpayers and would be regressive.

“Introducing refundable tax credits would cost the same as increasing the standard rate threshold for income tax by just €1,000.”

The Ictu submission said the case for a cut in direct taxes on income “must be seen as extremely weak”.

“Increasing the stardard rate band by €1,000 would cost €140 million and would benefit less than one in five workers.”

Mr Begg said the current system of tax credits had a limited impact for many low-paid workers who did not earn sufficient income to use up their full tax credits.

“The introduction of refundable tax credits would tackle this issue as the unused portion of their tax credits would be refunded to such workers. A study undertaken for Social Justice Ireland identified that 130,000 low-paid workers and their families would benefit from refundable tax credits.”

Mr Begg said Government should be very cautious in how it handled the introduction of water charges.

“Access to water is a human right. Moving from paying for water services through general taxation to a system of regressive user charges risks plunging vulnerable households into water poverty. The announced system of free allowances is by itself wholly insufficient to prevent households from falling into water poverty as well as being an inefficient and expensive policy tool.

“If water charges are to be introduced then the already announced free allowance will have to be supplemented by a system of water credits or cash transfers for lower and middle income families. Congress proposes that only those households with a gross income of at least €80,000 should have a net household water charge in 2015.”

Under the Ictu proposals a net wealth tax would be introduced for households

with a net wealth of more than €1 million. It suggested that it could be set at a low rate of 0.5 or 0.6 per cent.