Wealthy could face more taxes through PRSI contributions – Burton
Published 25/11/2011 | 17:47
LANDLORDS and investors could be in line for a new levy as Social Protection Minister Joan Burton suggested the Government should be looking at taxing the wealthy more.
As Tanaiste Eamon Gilmore moved to ease union fears over a €1bn public service pay cut plan, his Labour Party colleague warned high earners could be forced to make more PRSI contributions.
"Everyone will be impacted by the Budget but we will try to lessen the impact on people who are in for instance low-paid employment, social welfare incomes - that the people who are well-off can bear proportionately more," warned Ms Burton.
Ministers have attended three Cabinet meetings this week to discuss the Budget, which Taoiseach Enda Kenny has described as an enormous challenge.
"The choices are unpalatable in a whole range of areas," he said.
In an address to the Cork Society of Chartered Accountants Ireland today, Ms Burton revealed that rental profits and dividends were being considered for additional tax under PRSI.
The minister is looking to fill a €1.9bn gap in the social insurance fund, used to pay some workers' illness or disability cover, and job seekers' allowance.
"I can plug this hole either by increasing rates of PRSI, reducing benefits or reforming the system. My preference is to reform the system," she said.
"One measure I am considering is widening the net to make certain types of unearned income such as rent profits and dividends liable to PRSI."
The Commission on Taxation recommended reforming the PRSI system in 2009.
Of the €3.8bn savings that will be made in the Budget, around €700m will come from the Department of Social Protection.
But landlords from the Irish Property Owners' Association claimed it would be another penalty on top of the universal social charge, the expected increases in capital gains and acquisitions tax, rent control and rising bank interest rates.
Chairman Stephen Faughan said the Government should be on the same side as landlords as they provide more than 600,000 people with homes.
"We need balance, not another blow which will no doubt banish investors," he said.
"Will there be a private rental market in five years?" he said.
Meanwhile, the Tanaiste moved to ease fears over public servants' pay and said cuts will vary from agency to agency.
He said reductions to allowances, premium pay and overtime, make good management sense and will be made within the framework of the Croke Park Agreement.
"That will vary obviously from agency to agency, from service to service," Mr Gilmore said.
"It will have to be done to ensure services are provided and continue to be provided. But I think anybody would agree it's good management to try to get down the cost in these areas."
The Department of Public Expenditure hopes to slice €1bn off the public service pay bill out of the €3.8bn savings the Government intends to make in the Budget on December 6.
Doctors, nurses, teachers and gardai already in the public service system will not be affected by the payroll cuts, but new entrants in 2012 will be.
Mr Gilmore said there are many ways to achieve the cuts and reductions, including changing the way in which a service is delivered.
But he added: "There isn't a one-size fits all solution to how we can achieve reductions in payroll. It depends on the service."
Some €2.2bn will be raised through tax hikes, including a proposed VAT increase of 2pc.
It has been suggested businesses could be at risk of closure following this hike, which may force consumers across the border.
Raising VAT to its top level of 23pc was outlined in Finance Minister Michael Noonan's medium-term fiscal statement at the start of November.
But Fianna Fail finance spokesman Michael McGrath attacked Mr Noonan's estimates that the hike would yield an additional €670m after it was confirmed Revenue have not factored in business lost to cross border shopping.
"If you speak with retailers in any town, village or city in Ireland, they will tell you that a 2pc increase in VAT will lead to less consumer demand," Mr McGrath said.
"In the border county areas, retailers are adamant the VAT increase will encourage more consumers to shop across the border.
"It is inconceivable the Minister has not taken this into account in calculating his figures."
Sinn Fein TD Gerry Adams warned earlier this week that the increase would have an adverse effect on businesses and result in job losses.
The VAT rise is being favoured over income tax hikes.
Meanwhile, Ms Burton said she opposed a special redundancy rebate scheme for profitable companies who lay off workers, citing the experience of workers at TalkTalk, Waterford and SR Technics in Dublin.
Under the current system businesses which make redundancies qualify for a 60pc rebate from the Social Insurance Fund even if they are in profit.