Budget is going to be big on mean sneaky stealth taxes
Keep an eye out for sly new taxes in December's Budget -- you're likely to pay more for your shopping bags, medical bills, cars and kids in 2012, says Louise McBride
IN three months' time, we'll have to cough up about €100 to cover the Government's new household services charge -- the precursor to our property tax. The charge, which will be paid by most homeowners, will get a lot heftier in coming years -- and it's not the only stealth tax we'll be hit with in December's Budget.
A raft of stealth taxes has already been flagged in the four-year plan signed up to by the previous government. Among those on the cards for 2012 are an increase in the carbon tax and changes to capital gains tax (a tax on profits made from the sale of assets) and inheritance tax.
But the Government will no doubt try to sneak other stealth taxes past us in Budget 2012 as it beefs up its coffers at our expense. So what nasty stealth taxes could we be hit with?
It's about three years since the Government fired a health-insurance levy at those of us who pay for private health insurance. The excuse given at the time was that without it, older people would pay more for private health insurance than younger people do. When first introduced, the annual levy was €160 for adults and €53 for children. It has since climbed to €205 for adults and €66 for children.
"This levy expires at the end of the year, so the Government will have to renew it -- and maybe increase it at the same time," said David Fennell, tax director with Ernst & Young.
As the adult levy has increased by an average of 13 per cent over the past two years, don't be surprised if it is pushed up to €231 in 2012. This levy is included in your private health insurance premium and currently takes €550 out of the pocket of a family of two adults and children with private insurance.
The Government could also cut the tax relief on private health insurance and medical expenses, according to Dr John Considine, economics lecturer with UCC. This would push up the cost of your health insurance premiums by about a fifth -- and you would no longer be able to claim back a fifth of the cost of certain medical expenses.
As these tax reliefs are the most expensive of the Government's health tax allowances, they're the most likely to be targeted, said Dr Considine.
The €100 charge for a visit to a hospital's accident and emergency unit (A&E) could also go up.
The four-year plan has already signalled that it will review motor tax. For most drivers, motor tax is between €104 and €2,100 a year, depending on how environmentally friendly their car is.
"The Government could introduce a higher, across-the-board motor tax next year," says Mr Fennell.
It could also cut mileage allowances -- essentially, a tax allowance that allows workers to claim back a certain amount of motor expenses incurred while working, he warned.
"This was one of the sneakier cuts of about two years ago, when mileage allowances were cut by about a quarter," says Fennell.
"That hit people's pockets. For those who travel a lot for their jobs, the mileage allowance is a good contribution towards their costs. Any further cuts to it would have an impact."
Two years ago, the Commission on Taxation recommended that child benefit should be taxed. Not doing so costs the Government about €427m a year -- and this, along with the tax credit for one-parent families, is the most expensive of the State's tax breaks for children.
The Government could, therefore, tax child benefit and also cut back on the tax credit for one-parent families.
"The tax expenditures for children could be hit before those for property and health," said Dr Considine.
"Child benefit and the one-parent family tax credit could be targeted as they're the biggest ones when it comes to expenditure.
"If the Government is going to go after stuff, it will go after the big ones"
The Government has already signalled that it will target Capital Gains Tax in Budget 2012. You currently don't have to pay any CGT on any profits made from the sale of your home -- but those days could be numbered. The massive cost of this tax exemption (€2.4bn a year) was highlighted in the recent Commission on Taxation report so it could well be curtailed.
Mortgage interest relief (which reduces the amount of interest paid by house buyers on their loans) will also be drastically cut back in 2012. If you're a first-time buyer, you can currently get relief at the rate of either 20, 22.5 or 25 per cent for the first seven years of your loan, depending on how far into your mortgage you are. Non-first-time buyers can get relief at 15 per cent.
If you buy your home in 2012 rather than 2011, you will only be able to get mortgage interest relief at a rate of 15 per cent if you're a first-time buyer, while those who are not first- time buyers will only get relief at 10 per cent.
YOUR SHOPPING BAGS
The plastic-bag levy, which is currently 22c, is another easy target for a cash-hungry Government. This levy could be increased in the December Budget, making it more expensive for grocery shoppers who forget to reuse their plastic bags.
Sunday Indo Business