Noonan unveils measures to raise extra €1 billion in tax
Taxes on savings, fuel, rental income and tobacco are set to increase as the Government seeks to raise an extra €1 billion in tax revenue next year.
In his Budget speech, Minister for Finance Michael Noonan said there would be no increases to income or corporation taxes as the Government was attempting to generate conditions that would protect and create employment.
He said the Coalition had decided to raise revenue through a raft of indirect taxes in order to make sure incomes were protected and that the wealthy paid their share. "Wages and salaries in January will be no less than wages and salaries in December," he said.
Mr Noonan also announced a number of measures that he hoped would encourage activity in the property market, provide help to homeowners in mortgage distress and help younger people play a more prominent role in farming.
They include an increase mortgage interest relief to 30 per cent for those who purchased between 2004 and 2008; a reduction in stamp duty on commercial property from the current top rate of 6 per cent to a flat rate of 2 per cent and changes to retirement relief from capital gains tax to incentivise the early transfer of farms and businesses.
There was also some relief for part time and lower paid workers with the exemption level for the Universal Social Charge rising from €4,004 to €10,036.
The indirect tax measures to be implemented include a 2 per cent increase to the higher VAT rate, a 5 per cent increase to capital gains and capital acquisition taxes, a 3 per cent increase to Dirt tax and the extension of PRSI to cover rental income.
He said a €100 household charge would also to be levied on property owners but this will not apply those in receipt of mortgage interest supplement.
The price of diesel and petrol is set to rise from tonight after the rate of carbon tax is increased from €15 to €20 per tonne and all bands of motor tax are to increase from January 1st.
Excise duty on a pack of 20 cigarettes is to rise by 25 cent, and the price of other tobacco prices is to increase on a pro-rata basis.
Mr Noonan said excise duty on alcohol will not be increased as it will be subject to the 2 point increase in the top rate of VAT. However, he indicated the Government does intend to raise the cost of alcohol sold in off licences and supermarkets at some stage in the New Year because of the social and health consequences of the availability of cheap drink.
He said the Government was not planning to increase the existing 1 per cent charge on betting turnover in bookmakers’ shops but this was pending the extension of the levy to on-line gambling and betting exchanges.
Plans to introduce legislation to abolish upward only rent reviews in commercial property leases have also been scrapped, with the Government citing constitutional difficulties for the u-turn.
Mr Noonan said that in spite of uncertainty in the domestic and European economy “a gradual recovery has begun to take hold” and that he expected Irish GDP to increase by 1.3 per cent next year.
“All forecasters agree that growth will be significantly stronger in 2013 and subsequent years,” he said, adding that growth would be driven by international and indigenous exporters.
Mr Noonan was quick to lay blame for the tough decision being taken on previous administrations saying “a decade of disastrous decisions” had forced the State to hand over its economic independence to the EU and IMF.
“The people of Ireland have paid a very high price for this mismanagement of the economy,” he said. “Personal wealth has been destroyed, thousands of people are sinking into poverty, emigration has returned and unemployment is far too high.
“The task of this Government is to regain control over Ireland’s fiscal and economic policies, to grow the economy again and to get people back to work.”
However, he did extend credit to his predecessor Brian Lenihan for taking tough decisions in previous budgets.
The Government hopes to collect an extra €1.6 billion in tax revenues next year, with some €0.6 billion of the figure coming through the implementation of measures arising from Mr Lenihan's budget last year over a full 12 month period.
The Coalition is seeking to reduce the general government deficit to 8.6 per cent in 2012 and is implementing €3.8 billion in saving and revenue raising measures in order to reach the target.
Minister for Public Expenditure and Reform Brendan Howlin yesterday unveiled cuts of €1.4 billion across a range of State services. This followed a €755 million cut to proposed capital spending projects.
Among the main points of Mr Noonan’s speech were:
- No increase to income tax
- Corporation tax stays at 12.5 per cent
- Higher VAT rate up 2 per cent to 23 per cent
- Exemption from Universal Social Charge rising from earning of €4,004 to €10,036
- Rate of capital acquisition tax rising from 25 to 30 per cent
- Capital gains tax rising from 25 to 30 per cent
- Dirt tax increasing from 27 to 30 per cent
- Mortgage interest relief rising to 30 per cent for first time buyers who bought between 2004 and 2008
- Excise on cigarettes and some tobacco products rising 25c
- Carbon tax on fossil fuels rising from €15 per tonne to €20 per tonne
- Vat rate of 9 per cent for tourism and hospitality being extended to open farms