Low-paid workers in line to pay income tax for first time
Budget to target the 50pc outside of net
Published 21/07/2010 | 05:00
GOVERNMENT ministers will today turn their attention to plans to make lower-paid workers pay tax for the first time.
As the first all-day cabinet meeting on the Budget begins in Farmleigh, all government departments are expected to have to impose average cuts of 5pc to help achieve a €3bn reduction of the deficit in the public finances.
But with the introduction of a property tax looking increasingly unlikely, a government source said last night that it was no longer possible to have 50pc of workers outside the tax net.
The options available to ministers include lowering the levels of tax credits to bring more workers into the tax net.
Finance Minister Brian Lenihan has also announced his intention to introduce a new universal social contribution to replace PRSI, the health levy and the income levy -- which could be extended to lower-paid workers.
Those earning less than €18,300 per year currently pay no income tax but have to pay the income levy of 2pc.
Bringing more of them into the tax net could raise €700m in tax revenue for the Government -- but such a move would be certain to provoke a storm of protest from low-paid workers.
Taoiseach Brian Cowen emphasised yesterday that today's meeting would be about discussing what went into the Budget -- and that no decisions had yet been taken.
"The overall budgetary strategy will form the basis of that and there will be many more cabinet discussions between now and December until these decisions are taken. When it comes out, you'll all have the answers," he said.
Yesterday, Green Party leader John Gormley indicated that certain areas would be off limits from the worst of the Budget cutbacks. He said education spending and funding for homeless people were very important.
The Department of Health would not comment last night on reports that some of the deepest cuts (up to €600m) might come from the HSE's budget.
A flat-rate water charge for every household and cuts to the old-age pension are also among the controversial measures that have not yet been ruled out.
Means testing child benefit has been out due to the difficulty of implementing it fairly between married and cohabiting couples -- so the Government's only option of reducing the cost is to go for a second cut across the board.
It is a measure of the difficulty of achieving the cuts that work on the Budget has begun almost six months in advance. Previously, such work would have been left until September.
All government departments have already submitted their proposals for budget cutbacks and Mr Lenihan is expected to take the lead at tomorrow's meeting by outlining the view of his Department of Finance.
Ministers will also finalise details of a €40bn five-year capital spending programme, which is expected to be launched this week.
This programme will have fewer roads, schools and other infrastructure projects than had been planned, due to the €20bn deficit in the public finances. Around €1bn of the €3bn in savings and taxation increases in the Budget will come from cuts to capital spending.
Fine Gael leader Enda Kenny yesterday referred to Mr Cowen's criticisms of the "pervasive negativity" in the media -- but said there were constant kites being flown by the Government about cuts in child benefit and the old-age pension.
He said there would be a positive response from the media if the Government was clear about what it was going to do in December's Budget.
Mr Kenny added: "The Government has done precious little to give a positive outlook to people who are hard-pressed -- those who cannot meet their mortgages or those who are unemployed."