Extra tax hikes included in Budget 2020 to fund €3.1 billion in spending
Rise in commercial stamp duty to help cover cost of more care hours, gardaí and allowances
Minister for Finance and Public Expenditure and Reform Paschal Donohoe is to announce Budget 2020 on Tuesday. Photograph: Gareth Chaney/Collins
Mr Donohoe is expected to raise the rate of stamp duty on commercial property from 6 per cent to 7.5 per cent in a move that will bring in almost €140 million.
It will be the second time in three budgets the Minister has increased the rate of commercial stamp duty, having brought it from 2 per cent to 6 per cent two years ago.
The overall budget day spending package, which was expected to be €2.8 billion, will now rise to around €3.1 billion.
As well as the increase in commercial stamp duty, Mr Donohoe will also announce a €6 increase in carbon tax, although the funds raised through this mechanism will be ring fenced for climate friendly policies. The increase for home fuels will not kick in until next May.
Other revenue raising measures include an increase of 50 cent in excise on cigarettes and an environmental charge on new and imported petrol and diesel cars, as well as increase in the rate of dividend withholding tax.
A contingency fund to deal with the effects of Brexit is expected to be in the region of €900 million to €1 billion, with €650 million to be borrowed in the event of a no-deal Brexit. The remainder will be made up of money from the EU, as well money carried over from previously announced Brexit measures.
Mr Donohoe wrapped up a series of meetings on Monday night when he met Fianna Fáil, whose support is needed to pass budgets under the confidence-and-supply deal. The party had pushed for more gardaí as well as health and education staff.
There were also meetings on Monday with the Independent Alliance. Its members will trumpet policies such as an increase of €15,000 in the inheritance tax threshold, a €30 million transition fund for five counties in the midlands where Bord na Mona is a significant employer, and changes to the qualifying thresholds for medical cards for the over 70s.
Increase in allowances
To help with an increase in the carbon tax, the fuel allowance - which may be rebranded the “energy allowance” - will rise by €2. There will also be a €5 increase in the living alone allowance from next March, as well as an increase from €34 to €36 in the dependent children allowance for those aged up to 12, and a €3 increase for those over 12.
The income disregard for the payments for parents of lone children will also increase by €15 and the income thresholds for the working family payment will rise by €10 for families of up to three children.
The home carer tax credit will rise by €100. The amount of time those in receipt of carer’s benefit can work or study will rise from 15 to 18.5 hours per week.
The self employed tax credit will increase by €150.
Funding will be made available for the recruitment of 700 extra gardaí, as well as 1,000 special needs assistants, over 100 special education teachers and 250 special class teachers in the education sector.
In health, 1,000 new frontline staff - such as speech and language, occupational and disability therapists - will be hired and there will be a big increase in home help hours.
Home help funding
There is set to be an additional allocation of €45 million-€50 million in home help funding, which will allow for one million home help hours, in top of extra hours needed to meet demographic changes.
The issue of home help had been pushed Minister for Older People Jim Daly and Fianna Fáil.
The National Treatment Purchase Fund will get an additional €25 million next year to tackle hospital waiting lists, bringing its budget to €100 million.
Prescription charges will fall by 50c and the drug payment scheme will see its threshold reduced by €10, but these changes are unlikely to take effect until later in the year.
The Help to Buy scheme for first time buyers, which was due to end this year, will be extended for another two years without any change to its structure.
The Budget is also expected to include an increase in the rate of dividend withholding tax - which is paid directly by companies to the Revenue in lieu of tax owed by their shareholders . The current 20 per cent rate is expected to rise - to circa 25 per cent - giving a cash flow boost to the exchequer and also catching shareholders who do not declare the dividend for tax at the higher 40 per cent rate. Anti-avoidance measures relating to property investments funds are also expected.
Big spending departments were among those which made their budget settlements late in the process with spending demands pushing up the cost of the overall budget package to be announced on Tuesday.
Demographic pressures let to unanticipated increases in the Department of Education while overall expenditure at the Department of Health could rise by as much as €1 billion next year, though much of this increase will be accounted for by pay rises and pensions for staff.
Sources with knowledge of the package on Monday night confirmed that basic welfare rates would not change in Budget 2020, but there will be improvements in a series of allowances available to the elderly, and a focus on children and childcare.
The increase in the threshold for over 70s medical cards has been agreed in part to compensate for the lack of universal basic welfare increase.
Senior Government sources feared the last minute nature of the negotiations increased the chances of an unforeseen political controversy arising out of the budget.