Brian Lenihan, Minister for Finance, believes that the worst is over and that this Budget is the last big push of this crisis. He says that the Department of Finance is now expecting a return to positive growth within six to nine months. We sincerely hope he is right!
We could accept this crushing Budget a little more readily if we believe the Minister. This is a savage Budget but it was expected, with the principal action taking place on the expenditure side represented by €4 billion in public expenditure cuts. Public servants face reductions in their pay of between 5% and 20%. Social welfare payments including job-seekers allowance and supplementary welfare allowance are being reduced with a justification advanced of a 6.5% overall cost of living decline. The State pension, though, will remain untouched.
In measures to widen the tax base, the Minister accepts the need for a property tax and a system of water metering for homes, both recommended by the Commission on Taxation. These items are work in progress. A Carbon Tax, though, is being introduced from today, set at €15 per tonne. This will apply to petrol and diesel from tonight and to home heating, oil and gas from next May. The restrictions for high earners availing of tax incentive schemes will also be tightened.
In the context of very limited resources, the €36 million allocated to Employers Job Incentive Scheme giving PRSI exemption is to be welcomed. Other small but positive measures are the reversal of the 0.5% increase in the standard rate of VAT last year (back to 21% from 1 January 2010), reduction in the duty of alcohol and the car scrappage scheme.
The continued commitment to the 12.5% Corporate Tax rate and proposals to enhance the attractiveness of Ireland for the funds industry are also welcomed.
The Minister signalled the introduction in 2011 of a reformed tax system combining a new universal social contribution (replacing employee PRSI, Health Levy and the Income Levy) and an Income Tax at progressive rates. This rate, though, must not be out of line if Ireland is to be an attractive location for international business.
In an attack at wealthy individuals who are Irish domiciled but not resident, an annual Irish domicile levy of €200,000 will be introduced next year. The Finance Bill will contain the detail along with measures aimed at tackling the shadow economy, smuggling and tax avoidance schemes.
View the Mazars Budget website here - http://www.mazars.ie/Home/News/Publications/Reports/Budget-Report-2010
This is an extract from the Mazars Budget Report 2010. For full details please download their Report here.
