Saturday 25 October 2014

Families can’t take any more punishing tax hikes – experts

Charlie Weston, Personal Finance Editor

Published 21/11/2012 | 09:51

HOUSEHOLDERS have now reached a point where they cannot bear more tax hikes in the Budget, experts warn.



A family with one income of €55,000 and two children is paying an extra €3,400 a year in taxes and levies since 2008.

A sixth austerity Budget next month will be too much for large numbers of people to cope with, the Irish Tax Institute said.

But next month’s Budget is expected to see the introduction of a property tax that is expected to cost a family with a €350,000 home €875 in tax in a full year. The charge is likely to be set at a rate of 0.25pc on the value of the home.

There are also expected to be changes in pay related social insurance (PRSI) and the universal social charge (USC).

President of the tax body

Martin Phelan said more taxes would mean people will spend less, some will work less, while there will be a growth in the black economy.

“A small base of people are contributing vast amounts of revenue for the Government. It is getting to a dangerous level with fewer people paying more and more taxes with less income,” Mr Phelan said.

Some €1.25bn in extra taxes is expected to be imposed by Finance Minister Michael Noonan in two weeks’ time.



Cuts



And an additional €2.25bn is expected in expenditure cuts. But the tax body said there should be an even greater emphasis on spending cuts, as it would be too damaging to the economy to tax income earners even more.

There is a limit to how much more can be imposed, the tax

body said. Changes to income tax, the introduction of the universal social charge, the removal of tax reliefs and child benefit cuts have meant those still in a job are paying vastly more tax since the economic downturn hit in 2008.

There are now 1.8 million income taxpayers, down 300,000 from 2007, the tax institute said.

Plans to introduce water charges and a property tax will mean there will have been 10 new taxes imposed on households in the last four years.

These include the income levy and the health levy, which became the universal social charge.

Also included are carbon taxes, the second-homes tax, the household charge, the domicile levy on high earners, the pensions levy on private sector retirement funds and the insurance levy.

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