Budget tax blitz
Sweeping hikes to hit middle income earners hardest
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WORKERS will be hit with across-the-board tax hikes and major cuts in public services in an emergency Budget this month.
The Government's decision to introduce new measures is a desperate attempt to find cash quickly to fill a new €3bn hole in the public finances.
The crisis Budget will broaden the tax base, bringing low income workers into the tax net and increasing the tax paid by middle and higher income earners by the end of the month.
Taoiseach Brian Cowen yesterday confirmed that the Government intends to introduce sweeping new measures to improve the public finances after the tax take at the end of February was already €1.8bn down.
His announcement came after several senior ministers ruled out a mini-Budget in recent weeks.
It is thought to be too soon to bring in a property-based tax as it would take too long to implement. Instead, income taxes and excise duties will rise to raise revenue quickly.
A reduction in the planned €8bn spend on infrastructure is also thought to be likely.
"There's €8bn sitting in the capital budget and I can't imagine it will remain untouched," a government source said.
Less than a week ago, Tanaiste Mary Coughlan said the public finances were under control. The Government is now predicting a Budget deficit of up to €21bn this year -- adding another €3bn to its previous predictions.
But the increase in unemployment, which will officially reach record heights today, is expected to add another €1bn to public spending, meaning the Government will have to find €4bn in total.
Mr Cowen said the Government is planning both tax hikes and spending cuts.
"We will make whatever decisions that are necessary, based on the Exchequer figures," he said. "I think it will be a combination of revenue raising and spending adjustments."
The Government will not have the reports of the Commission on Taxation or the so-called 'An Bord Snip Nua' to work off.
After Mr Cowen confirmed that the Government will most likely have to pass new laws to bring the measures into effect, the Opposition said it was "a Budget by any other name".
Fine Gael leader Enda Kenny said the €21bn deficit forecast has forced the Government to bring in a new Budget, which he was calling for months ago. He said there should be a 1pc increase in the top rate of tax.
Labour Party finance spokesperson Joan Burton said the Government has effectively agreed that a new Budget is necessary, "even if, bizarrely, it refuses to use the B word".
Along with the cuts in spending and tax hikes, the Government will publish revised estimates on departmental spending at the end of the month.
But there will be further negative economic tidings today when the jobless total will reach record heights, pushing the rate to 10pc.
Today's figures from the Central Statistics Office will pile more pressure on the Government which is already jolted by the sharp drop in exchequer revenue.
The standardised unemployment rate in January was 9.2pc, up from 8.3pc in December.
January saw the loss of 36,500 jobs, pushing the total on the Live Register to 327,900 for the first time. The losses continued into February at a slightly lower rate.
At the weekend, the Taoiseach Brian Cowen accepting that the total figure could go over 400,000 before the end of the year. Some experts say it could hit half a million by December.
The business representative group, IBEC, said the plan for recovery should be equitable and support jobs.
The Government's decision to bring in the new spending measures followed the emergence of exchequer returns showing tax revenue in January-February this year almost 24pc below that of the same period in 2008.
- Brendan Keenan, Fionnan Sheahan and John Walshe
