Property tax, child benefit cuts and duty hikes unveiled


A property tax and changes to the PRSI system likely to cost PAYE workers more than €250 per year were the key revenue raising measures outlined in the State’s sixth austerity budget in five years.

A cut to child benefit, increased duties on alcohol and tobacco products, a hike to the student contribution charge, and rises to the rates of motor taxes and DIRT tax on savings were some of the other headline announcements as the Government seeks to save €3.5 billion next year.

Minister for Finance Michael Noonan announced taxation measures which he expects to generate €1.25 billion and Minister for Public Expenditure Brendan Howlin has cut expenditure for 2013 by some €2.25 billion.

* Main points of Budget 2013

Mr Noonan said it was “a good day for taking stock of where we are” as a country.

He said the State’s general deficit would stand at 8.2 per cent at the end of the year, inside the 8.6 per cent bailout target. This would fall to 7.5 per cent in 2013, 5.1 per cent in 2014 and 2.9 per cent in 2015. The figures, he said, were based on economic growth of 1.5 per cent next year, 2.5 per cent in 2014 and 2.9 per cent in 2015.

The property tax, Mr Noonan said, is to be levied at a rate of 0.18 per cent on properties worth up to €1 million and 0.25 per cent on properties valued at more than that.

He said certain properties would be exempt from assessment for the tax, in a similar way to exemptions from the €100 Household Charge. There will also be a system of voluntary deferral arrangements to assist those facing difficult circumstances.

Speaking tonight, Taoiseach Enda Kenny said the Budget was the most challenging that would have to be delivered in the lifetime of the Coalition.

He told RTÉ News that he hoped it could move the country forward toward economic development.

Asked if the property tax was a fair measure, he said the Government had a straight choice between it and increasing income taxes and other taxes on employment. The tax was designed to be “fair” and “progressive” and there were a range of deferral options for those who could not afford to pay.

Mr Noonan also announced the abolition of the weekly PRSI allowance for workers, likely to mean workers pay an extra €264 annually, and increased the minimum level of annual contribution from the self-employed from €253 to €500. The PRSI changes will bring in €339 million to the Exchequer per year. Income tax rates went unchanged.

Excise duty is to increase by 10 cent on pints of beer and cider and measures of spirits, and by €1 on a 750ml bottle of wine from midnight. The price of a pack of cigarettes is to go up by 10 cent from midnight and the price of a 50g pouch of tobacco is to rise by 50 cent.

Motor tax is to rise by between €10 and €126, with a carbon tax on peat and coal to be introduced on a phased basis.

Spending in the areas of Social Welfare and Health will increase by €150 million each, to €20.2 billion and €13.6 billion respectively.

Mr Howlin said the Government had decided that reducing the primary weekly rates of social welfare would have a detrimental impact on domestic demand.

However, he said child benefit would be cut by €10 per month, saving €136 million next year, and jobseekers benefit would only be available for nine months, rather than 12 months, which would save €33 million in 2013 and €82 million in a full year.

Mr Howlin announced changes to the telephone element of the household benefits package, to save €60 million, and the electricity allowance, to save €20 million.

Noonan and Howlin's Budget 2013 speeches to the Dáil:

Prescription charges for medical card holders are being tripled from €0.50 to €1.50 with the monthly cap for a family rising from €10 to €19.50.

The respite care grant, which is made to carers on an annual basis, is to be cut by €325 to €1,375 per annum.

In health, access to medical cards for over-70s is being restricted with individuals with an income of €600-700 per week (€1,200-1,400 for a couple) now qualifying for a GP-only card rather than the full card.

Professional fees for GPs and pharmacists are being cut again, in a move which will save €70 million.

The €2,250 third level student contribution charge is to increase by €250 in each of the next three years.

The reduced rate of USC for those over 70 with an income in excess of €60,000 will be discontinued at the end of the year and they will pay the standard rate.

Mr Noonan said he was increasing the DIRT tax on deposits by 3 per cent to 33 per cent, decreasing the threshold at which Capital Acquisitions Tax applies by 10 per cent and increasing the rates of Capital Acquisitions Tax and Capital Gains Tax by 3 per cent to 33 per cent from midnight tonight.

"Today, on Budget Day, the Government recommits itself to this task, and political friends and foes alike should be under no illusion; this Government will not resile from the task in hand," Mr Noonan said. "We will not dither or procrastinate but will drive forward to lead this country out of the despair and despondency and lack of self worth in which we found ourselves in March 2011."

The State now had the basis of a renewed economy that will lead to greater employment, he said.

In order to support small businesses in this new economy, Mr Noonan said he was reforming the three year corporation tax relief for start up companies to allow unused credits to be carried forward.

He is also changing the R&D tax credit by doubling the initial spend eligible for the credit from €100,000 to €200,000 and extending the foreign earnings deduction for work related travel to certain countries beyond the BRICS, to support exports.

The VAT rate for the tourist industry will continue at 9 per cent, as opposed to 13.5 per cent, in 2013, a rebate on fuel will be available to hauliers from next July, and a range of support funds are being developed by the National Pension Reserve Fund to provide equity, financing and restructuring options.

The rate of corporation tax is to be maintained at the current level. The Government is providing Enterprise Ireland with an allocation of €139 million to support indigenous Irish exporters in 2013. A new ten-year €175 million Venture Capital Fund is being rolled out to fund new and expanding Irish companies.

Mr Howlin concluded by saying that when he took office last year, he “could not be certain that we would make it through this crisis”.

“I no longer hold this fear,” he said. “What the people of Ireland have endured has been tough, almost without precedent in the developed world.

“That we will come through it, and we will, is a significant shared achievement. In time, future generations will be proud that we, as a people, tackled this crisis head on. There remain difficult challenges ahead of us but Ireland and her people will prosper again.”

The Government had a comfortable majority of 108 to 49 on the first vote on the Budget tonight. The increases to excise on alcohol and cigarettes were supported by Fine Gael and Labour and opposed by Fianna Fáil, Sinn Féin and Independents.

Submit your budget queries to experts from The Irish Times and PwC who will  answer questions until noon on December 6th. 

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