Taste of tougher things yet to come

FUTURE BUDGETS:TOUGH AS the measures in yesterday's Budget are, worse is in store for Irish taxpayers, Minister for Finance has Brian Lenihan warned.

“In 2010, we will seek up to an additional €1.75 billion from taxation. In 2011, the target will be to raise up to an additional €1.5 billion,” the Minister told the Dáil.

“Options to raise this may include the taxation of child benefit, the introduction of a carbon tax, a form of property tax and significant further base broadening through the elimination of unnecessary reliefs and a review of all areas of tax-exempt incomes.”

Later, the Minister clarified that, in his Budget for next year, child benefit would be either means-tested or taxed.

“The Government does not think that it is fair to pay the same level of benefit irrespective of the level of income of the recipient,” he said. Other forms of welfare payment will also come under review. While Mr Lenihan said he would not take back any of the 3 per cent welfare payment increase announced in the October budget, he added “it may be necessary to review rates of payments in future years if reductions in the cost of living materialise”.

Homeowners, too, are in his sights. After restricting eligibility for mortgage interest relief to the first seven years of a home loan, he said: “As house prices fall, the provision of mortgage interest relief will be kept under review with a view to eventual abolition.”

This is one of the issues before the Commission on Taxation which reports back in July.

The commission is also examining various aspects of the current tax regime on pensions, “including the treatment of lump sums”, the Minister said.

He said he expected to be dealing with its recommendations in the 2010 budget in December, coincidentally the date for a review of the public sector voluntary redundancy programme announced yesterday.

And that wasn’t the only shot across the bows of the public sector. Mr Lenihan said he had asked the Review Body on Higher Remuneration in the Public Sector to undertake a fresh review of top-level pay rates, benchmarking them against EU countries of comparable size rather than, in his words, “with top-level private sector pay in this country which had become over-inflated in recent years and is now falling in any event”.

Overall, he warned: “The measures I have outlined have necessarily concentrated on income. I am now giving notice that, in 2010 and 2011, I will turn to other areas of taxation to achieve the necessary adjustment in later years.”

On the spending side, he said savings would come through “more targeted welfare provision, further reductions in public service costs and numbers, and the wider application of charges”.

The spending cuts announced yesterday equal €1.8 billion in a full year. The Minister needs to find a further €4.8 billion in 2010-2011.