Minister to rely on bank levy and higher Dirt tax on savings to raise revenue
Department of Social Protection’s target for cuts cut by more than €200 million
The Minister for Finance Michael Noonan before last year’s budget: he has to find €900 million in additional revenue Photograph: Eric Luke/The Irish Times
The Government has already flagged initiatives in today’s budget that will cost money – free GP care for under-5s; retention of class sizes; and a jobs initiative – so additional cuts and taxes will be levied to balance the books.
The €600 million reduction in the overall adjustment target from the original figure of €3.1 billion has come as a boon to the biggest spending departments.
- Noonan to announce range of harsh cuts in budget
- Follow Budget 2014 on irishtimes.com
- Morecambe and Wise of Irish politics are powerful figures in Government
- Free care for under-fives may be inequitable but will bolster future health of nation
- Minister to rely on bank levy and higher Dirt tax on savings to raise revenue
- Thousands of over-70s to lose full GP cards
The Department of Social Protection’s target for cuts has been reduced by more than €200 million, from the original €440 million to about €230million.
However, there may be some creative maths here. The smaller adjustment has partly been made possible by new revenue-raising measures. Some of these will focus on fraud detection, and estimates for how much can be saved by detecting fraud tend to be nearly always overstated.
Nominally Minister for Finance Michael Noonan has to find €900 million in additional revenue. But his task has been made easier by two measures introduced in last year’s budget.
Property tax was only levied for six months in 2013. So for 2014 he will benefit to the tune of an extra €250 million in revenue when the first full year of tax is collected.
Similarly, a tax on pension pots worth over €60,000 in income each year was announced last year but will only come into operation in 2014. It brought in nothing in 2013 but will bring in €250 million in 2014.
Another €100 million or so will come in during 2014 from other 2013 measures that did not operate for 12 months this year.
Thus, Mr Noonan has to raise only €300 million or so from new announcements to reach his revenue target.
The reality is that it will be a higher figure because of an ambitious jobs announcement aimed at small and medium businesses and construction, although there will be no reduction in VAT as happened with tourism.
The Minister will reach €300 million from the revenues raised from just two measures: the €200 million bank levy and the increase from 33 per cent to 41 per cent on the rate of Dirt tax applied to savings interest (worth €100 million to the Exchequer).
There may be some changes to capital acquisitions tax and capital gains tax, plus increases in charges for medical expenses such as prescription charges.
There may be some increases in duties on tobacco, plus some excise changes.
On the spending side, the big ticket item is the lowering of the jobseeker’s allowance to €100 per week to all under-25s, with 25-year-olds getting a reduced rate of €144.
Telephone allowances worth €9.50 a month are being scrapped for pensioners, and eligibility requirements for medical cards for over-70s are also being tightened.
The mortgage interest supplement, which costs more than €70 million per annum, will be scrapped for new applicants.