Revealed: Cigarettes, diesel to rise in Budget but squeezed middle to gain as little as €2 a week
Published 28/09/2016 | 02:30
The Budget Day tax package will spread €330m so thin that most workers are unlikely to feel any real impact in their wallets.
Finance Minister Michael Noonan has compiled a plan which attempts to please businesses, farmers and landlords - but will see the so-called squeezed middle income earners gain as little as €2 a week.
The Irish Independent understands that he plans to reduce the two lower rates of Universal Social Charge by 0.5pc, to 2.5pc and 0.5pc respectively.
Mr Noonan is signalling he won't reduce the 5.5pc rate which hits incomes between €18,000-€70,000.
Sources said he would tweak the thresholds but ultimately the benefit to middle-income earners would be little more than €100 a year.
Mr Noonan's tax package will also include:
- Tax breaks for landlords.
- A reduction in capital gains tax for start-up companies to 10pc on earnings up to €10m.
- A special deal for farmers that will allow more flexibility in their tax payments.
- Inheritance tax exemption to be raised by €40,000, to €320,000.
- Incentives to encourage the regeneration of historic dwellings.
- Doubling the €550 income tax credit for the self-employed.
- A hike to cigarette prices.
The minister revealed details of the plans to Cabinet yesterday with sources telling the Irish Independent each measure proposed was done so for "a very specific reason".
Reducing the tax burden on landlords is seen as a way of helping the rental market.
Currently, tax relief for landlords is restricted to 75pc of the allowable mortgage interest for residential properties. This will be raised by 5pc each year over the next five years.
The Budget will also contain a series of measures aimed at "Brexit proofing" Ireland and attracting more start-up entrepreneurs.
Mr Noonan is very concerned that start-ups are being lured away by generous tax breaks in London and intends to reduce capital gains tax to just 10pc on the first €10m.
His Brexit plan will also see the continued reduction of the national debt "in order to prepare for any potential shocks".
Changes to the inheritance tax thresholds will be limited to parents leaving property to children.
Details of Mr Noonan's tax package emerged against a backdrop of heightening tensions between Fine Gael and Fianna Fáil.
As both parties battle to lay their marker on the Budget, senior Fine Gael sources said Micheál Martin had created a shopping list that was "not based in reality".
They also claimed that Fianna Fáil's decision to abandon the principle of water charges "calls into question their economic credibility".
And in the Dáil, Taoiseach Enda Kenny publicly rebuked demands from Fianna Fáil to set aside €100m for colleges.
Mr Martin has sought assurances that the Budget will include a "realistic response" to the third-level funding crisis - but Mr Kenny said it "cannot be dealt with comprehensively in the forthcoming Budget".
"This is one of a whole range of areas that now demand and require substantial funding in the forthcoming Budget. The money is not there to do that, nor can it be," Mr Kenny said.
However, Mr Martin said the Government risked "ignoring the future of this country at our peril".
Government sources later described the demand for €100m as "pie in the sky" and said Fianna Fáil was "trying to own and disown the Budget".
"Fianna Fáil's feet need to be held at the fire outside of the confidence and supply review," a source said.
A senior Fianna Fáil source last night accused Fine Gael of "playing games", "immature politics" and "posturing".