Wealthy OAPs to be hit but hope of deal for house buyers
Published 01/12/2012 | 10:02
WEALTHY pensioners are in the firing line as Finance Minister Michael Noonan finalises his tax package in the Budget.
He is also looking at possible ways to assist the housing market and incentivise first-time buyers.
Cuts to TDs' expenses and ministers' perks are also on the cards.
The Government's move to hit high-earning pensioners comes as new figures reveal at least 170 retired bankers who worked at bailed-out lenders are getting pensions over
€100,000. These lavish sums are five times what a typical pensioner has to live on.
Just 2pc of retired bank staff get the huge pensions above €100,000, but revelations about so-called "super pensions" in bailed-out banks have angered taxpayers.
Mr Noonan is regarded as having two options: an increase in the Universal Social Charge on incomes above a certain level; or changes to the PRSI rules for big pensions.
Meanwhile, Mr Noonan is also weighing up how to assist the property market and incentivise buyers.
The minister is adamant that he is stopping mortgage interest relief for first-time buyers at the end of the year and colleagues feel he will not change his mind.
However, he is believed to be looking at a number of proposals which have yet to be decided:
-- A VAT refund for first-time buyers of a newly built house.
-- A property-tax holiday for first-time buyers.
-- Tax discounts on the cost of home improvements.
He may also choose to leave the market alone as it shows tentative signs of recovery.
On the property tax, it looks like there will be a three-year freeze on the amount to be paid by homeowners. This would allow for the owner to carry out improvements without affecting market value.
There is some hope for people who bought during the boom and are saddled with high mortgage repayments on a limited income.
Single people on an annual income less than €20,000 and couples on less than €30,000 may be able to defer payment of the property tax. But they will be expected to pay the tax if the property is sold or their financial situation improves.
Mr Noonan is also hoping to boost the construction industry by cutting VAT in this sector from 13.5pc to 9pc.
At a crunch cabinet meeting today, the remainder of the "politically toxic" health and social welfare cuts are expected to be thrashed out.
Meanwhile, figures released by the Department of Finance show tax revenues are going to be down €210m.
Mr Noonan is under pressure to wield the axe on former bank bosses, but he has argued he cannot legally target just one group of pensioners. So the Coalition is looking at hitting high earners with a levy that will include pension income. Coalition sources also say cuts to TDs' expenses are on the way.
The Labour Party has been pressing for a 10pc Universal Social Charge (USC) for incomes above €100,000. But targeting the generous PRSI regime for pensioners is also a possibility.
Pensioners get an age-related tax credit and do not have to pay related social insurance (PRSI), which is 4pc. The relief means taxpayers under the age of 65 who earn €40,000 pay €2,800 more in income taxes than a retiree on the same income.
And over-70s pay a lower rate of USC. They pay €3,500 less in tax than a younger person, if they are both earning €40,000.
A government source said that there would definitely be a measure to tackle bankers' and ministers' high pensions.
"You don't have to be a genius to know that. The payments are outrageous," the source said.
The figures on bankers' pensions emerged in a response by Mr Noonan to Fianna Fail finance spokesman Michael McGrath. AIB has the highest number of "super pensions", accounting for more than half.
Last night, however, the figures were already in dispute because at least one bank – Irish Bank Resolution Corporation – only included figures for those on defined-benefit pensions.
The Cabinet is believed to have been engaged in heated debates this week, particularly over social welfare cuts. But jobs minister Richard Bruton said the suggestions of rows were "grossly exaggerated".
The Department of Transport has pencilled in an €8m cut for regional roads, a €2.6m cut for the Road Safety Authority, a €5m cut for regional airports and a €1.5m cut for rural transport schemes.
There will also be a €4.6m cut to the Irish Sports Council, which pays the salaries of elite athletes such as Katie Taylor. It is expected that there will be a cut in the €1m grant to GAA hurlers and footballers.
Meanwhile, Labour TD Ciaran Lynch called for a change in the budgetary process. He said spending should be examined by the Dail every four months.