Tax hikes must yield €3bn in two years
UP to €3bn will be raised in higher taxes and reduced tax reliefs in the two Budgets for 2012 and 2013, the bailout agreement confirms.
This will follow the €2bn in total tax rises due in next week's Budget. The Government's four-year plan calls for a reduction of more than €16pc in the value of tax credits and bands, adding €2bn a year to the income tax burden.
The agreement commits the next government to the introduction of a property tax in 2012 and a doubling of the carbon tax due to be introduced in next week's Budget to €30 per tonne.
An interim tax is to be levied at €100 per year, with a site-value tax in 2013 expected to average €200 per year.
The Memorandum of Understanding makes it clear that it will be difficult for a new government to re-negotiate the tax and spending plans agreed.
"In exceptional circumstances, measures yielding comparable savings could be considered, in close consultation with European Commission, IMF and ECB staffs," it says.
The 2011 Budget will also contain reform of capital gains and capital acquisitions tax and further reductions in tax relief on pensions.
The Government's four-year national recovery plan will reduce maximum relief on pension contributions to 34pc in 2012 year; falling to 27pc in 2013 and 20pc in 2014.
Interest relief on mortgages was abolished on a phased basis in the last Budget.
Loans take out after 2012 will not qualify for relief and it will be removed from existing loans in 2018.
There will be €2bn of spending cuts in the 2012 Budget, and "at least" the same again in 2013.
Meanwhile, it emerged yesterday that the Government is planning to vote on social welfare cuts in the Budget before coalition TDs go home to their constituencies for the weekend.
The cuts are part of the EU/IMF bailout deal.
By rushing through of the votes, Fianna Fail hopes to ensure it own backbenchers and other Independent TDs cannot be targeted to reverse the cuts.
Cuts in social welfare of anything up to €750m are expected to be announced in Budget 2011.