Rise in commercial stamp duty to help fund €1.1bn budget

Threshold for higher rate of income tax could rise by €750 with significant State spend planned

Minister for Finance Paschal Donohoe:  the overall size of the package of new tax cuts and spending commitments  is expected to be about €1.1 billion to €1.2 billion. Photograph: Reuters

Minister for Finance Paschal Donohoe: the overall size of the package of new tax cuts and spending commitments is expected to be about €1.1 billion to €1.2 billion. Photograph: Reuters

 

Significant increases in spending on health, welfare and infrastructure, paid for by tax increases on commercial property transactions, will be unveiled by the Minister for Finance and Public Expenditure Paschal Donohoe when he presents the first budget of Leo Varadkar’s administration today.

Workers will also see reductions in taxes, while those on welfare will also see increases in weekly payments.

The overall size of the package of new tax cuts and spending commitments was being finalised last night but is expected to be about €1.1 billion to €1.2 billion.

Both lower rates of USC are expected to be reduced, with the 5 per cent rate dropping by a quarter of a per cent, while the 2.5 per cent rate, paid on incomes of €12,200-€18,800, will fall by half a per cent.

In addition, the threshold at which people enter the higher, 40 per cent rate of income tax will rise from its current level of €33,800 by €750 for a single person to €34,550.

A package of increases in welfare payments was still being hammered out on Monday but is expected to include a €5-a-week increase on most welfare payments, though the rises will not kick in until the spring of 2018.

There will also be an increase, expected to be about €400 million, in capital expenditure on housing and an increase in funding for the Housing Assistance Payments (HAP), a social welfare support for people who have a long-term housing needs, is also expected.

New agency

To pay for all this, Mr Donohoe is expected to announce that the rate of commercial stamp duty will increase from two per cent to six per cent. This will raise more than €400 million and will be the main revenue-raising measure of the budget.

A packet of 20 cigarettes will increase by 50 cents but duties on alcohol will remain untouched. There will be no changes in the price of diesel or petrol.

The pupil-teacher ratio will drop to 26 pupils for every one teacher in primary schools, which had been identified as a priority by Fianna Fáil. The current pupil-teacher ratio is 27:1.

A string of measures are expected to tackle land hoarding, including an increase in the proposed vacant site levy from three per cent to seven per cent.

There are also expected to be changes to capital gains tax for investors who availed of a seven-year exemption introduced in 2012. A new agency, understood to be named Home Building Finance Ireland, will be established to provide cheap loans to developers. It will draw on the experience of Nama, sources say, and will be funded by the sale of assets by the Irish Strategic Investment Fund (ISIF).

Prescription charges

The Department of Health will see a significant increase in funding, while prescription charges are to be reduced for everyone with a medical card under 70. The National Treatment Purchase Fund will be increased by €55 million to tackle waiting lists.

The Department of Children and Youth Affairs will be given money to fund an extra 300 staff for Tusla, the child and family agency. The agency will be given funding to develop a national out-of-hours phone service for reporting child abuse.

The social welfare Christmas bonus is expected to be paid at 85 per cent of its usual rate.

The Cabinet will meet at 8.30am on Tuesday to approve the budget, when Ministers will be briefed on the full package of spending and taxation measures.

Mr Donohoe and his officials are scheduled to brief the Fine Gael parliamentary party on the budget at noon, and he will make his budget speech to the Dáil at 1pm. His contribution will be responded to by the Fianna Fáil finance spokesman Michael McGrath, and by speakers from the other parties throughout the afternoon.

Stamp duty and excise changes will be voted on in the Dáil on Tuesday, with the Government needing Fianna Fáil TDs to abstain for the budget to pass.