Report suggests 'payroll tax' to protect healthcare

Thu, Nov 29, 2012, 00:00

The introduction of a “payroll tax” to fund increased health spending, hikes in taxes on alcohol and tobacco, and the creation of new “sin taxes” on certain foods are suggested in a new report commissioned by the Department of Health.

The report, which has been relied upon by the department in pre-budget discussions, argues that additional cuts cannot be made to the health budget without damaging patient care unless high salaries and drug costs are tackled.

The Government faces several options on health spending, according to the report, written by the World Health Organisation and European Observatory on Health Systems and Policies.

First, it can continue with budget reductions as set out in the programme for government. A second option is to put the case to the troika for limiting further cuts in health because of the effect on services.

“Third, a new source of statutory revenue could be introduced, for example a payroll tax earmarked for health to supplement general revenues.”

Payroll taxes, found in 18 out of 27 European countries, are common across high-income countries, the report notes.

The report says there are strong arguments for increasing “sin taxes” (eg on alcohol and tobacco) on health grounds alone and says it is likely this would result in reduced consumption and increased tax revenue.

Labour Party Oireachtas members say they have been advised to expect a cut in child benefit in the region of €10 to the universal rate. It is paid to 600,000 households and costs the State €2 billion a year.

The Cabinet met yesterday to discuss next week’s budget and will meet again this morning.