It may be coming earlier this year, but the expectations are that the Budget won’t be as tough as those that have gone before it. While we won’t know for sure the full impact of this year’s “adjustment” until next Tuesday, it’s likely that – at first glance at least – the measures to be announced won’t cut as deeply as the austerity budgets that have preceded it.
The major tax revenue raising measure in this year’s exercise is likely to be one we are all already starting to come to terms with – residential property tax.
Introduced earlier this year, the tax, which is levied on the value of properties across the State, has already generated about €200 million. However, familiarity won’t ease the pain when the full year impact kicks in in January and it’s still likely to cause some pain. Apart from that, the perception is now that people can’t simply afford to give up any more income. There is just no bite left to take from the apple.
Grant Thornton has done the sums and estimates that the average family has already lost €300 a month over the austerity budgets of the past five years. A considerable sum, it is due mostly to the introduction of new taxes, like the universal social charge and local property tax, alongside the reduction in child benefit.
And the cuts have been hitting lower income workers harder. For example, a one-parent family earning €40,000 has seen its tax bill increase by 125 per cent since 2008, corresponding to a €300 a month decline in income. If the couple was both earning this sum, and had two children and a house valued at €200,000, the tax bill would have risen only by 54 per cent.
And, a top-earning family, with a combined income of €190,000, has only seen a 29 per cent increase in their tax bill.
Given the particularly onerous hit those on lower incomes have already taken, we’re unlikely to see any changes to either tax rates or bands. So, by and large, families may emerge from this budget with a similar amount in their take-home pay each month.
Higher earners, particularly those coming close to retirement, may be hit by the likely diminution in the maximum pension fund allowable for tax purposes.
Families with public sector employees are unlikely to see any specific measures aimed at them, given that a lot of their terms and conditions are being dealt with in the Haddington Road agreement.
Still, while the headlines might be thankfully free of major tax hikes next Tuesday, the Government is likely to look to raise additional tax revenues in a more insidious fashion. SOurce: The Irish Times.