Friday 16 November 2018

Donohoe doles it out, but confusion over hike to tax on property sales

Finance Minister spreads €1.2bn package far and wide to ensure most people will benefit a little

Paschal Donohoe
Paschal Donohoe

Kevin Doyle and Charlie Weston

Finance Minister Paschal Donohoe has attempted to spread the gains of the economic recovery far and wide in his first Budget.

The €1.2bn package has been designed to ensure most people end up with a little more in their pockets. Working families set to gain around €8 a week from tax changes.

Cuts to USC and income tax are to be funded with a steep hike in commercial stamp duty, a levy that will hit large property transactions.

But Opposition TDs immediately questioned the logic of relying on property-related taxes to pay for social welfare hikes.

The move also sparked a backlash from farmers as it looks set to be applied to agricultural land sales.

This is the fourth budget to give something back, this time with changes to USC and tax bands - but those in receipt of mortgage interest relief will see many gains wiped out.

The phased reduction in the mortgage relief for boom buyers will see around 400,000 homeowners lose up to €450 annually from next year, according to figures from KPMG.

In a bid to raise more revenue and improve the health of the nation, Mr Donohoe announced increased taxes on sugar-sweetened drinks, cigarettes and the use of sunbeds.

But most families are still set to benefit from changes in income tax, an extension of the childcare programme, and extra money to ease the cost of medicines.

Fine Gael, Fianna Fáil and Independents all moved to claim credit for the various payouts.

Among the key measures are:

A widening of the tax band worth €150 year to a family with one earner.

Cuts to the USC worth €130 for dual-income married couple.

A €5 hike in the weekly pensions, and other social welfare payments

More tax relief when a parent works in the home, and a higher tax credit for the self-employed.

Mr Donohoe is gambling that his decision to bump up stamp duty on commercial property transactions will bring in €376m to largely fund his give-aways.

However, there was major confusion last night as to whether the hike in stamp duty would hit the sale of agricultural land.

Agriculture Minister Michael Creed told reporters that farm land would not be included in the new measure. But senior finance sources confirmed to the Irish Independent there will be no exemption for agriculture land sold on the open market.

"If the land is being sold as a farm, then the buyer will have to pay the new 6pc rate of stamp duty. If it is being sold as a site for residential development, then the tax won't apply," said the source.

Exemptions are already in place for farms sold within families or for some young farmers buying land.

Defending the decision to raise social welfare payments on the back of the measure, the source said the minister was confident the €376m would be achieved in 2019 because the estimate was "conservative".

The sugar tax is expected to raise €40m a year and will add 60c to the cost of a two-litre bottle of most fizzy drinks from next April.

The price of a pack of cigarettes rose above €12 at midnight, following a 50c increase in excise duty.

For the second year in a row, the €5 increase in all social welfare payments has been delayed. The hike, benefiting 1.5 million people, will kick in from March 26 next year.

Social Protection Minister Regina Doherty said: "We only had a certain amount of money and if we had introduced the €5 across the board, to all weekly payments, I would have had to stop there and that wasn't a Regina Doherty Department of Social Welfare Budget."

Fianna Fáil had made education a priority in their Budget negotiations with the result that the pupil-teacher ratio in primary schools will be at its lowest ever level next September.

Funding has been supplied for 1,300 extra teachers in order to ensure there is now one teacher for every 26 pupils. It will have a direct impact on about 300 schools with the most overcrowded classes.

Health and housing got the biggest overall Budget increases, as the Government struggles to combat a series of crises in both departments.

A €750m fund for builders, an additional €75m to open up sites for residential development and 3,800 new social homes in 2018 are among the main housing measures.

The Department of Housing will spend more than €1.8bn next year through building, buying and leasing properties, with the budget for Housing Assistance Payments (HAP) doubling to €301m.

Housing Minister Eoghan Murphy said the measures would help address the homeless crisis, ramp-up the social housing new-build programme and deliver affordable homes.

Health Minister Simon Harris is to receive an extra €685m, bringing his budget to a record €15.2bn.

Private patients with high monthly medicine bills will save €120 a year once the threshold for the Drugs Payment Scheme is reduced from €144 to €134.

All medical card holders will see the prescription charge fall from €2.50 per item to €2.

It means the maximum they will have to pay per month is €20, leaving them with €60 extra a year.

Mr Donohoe also announced a €350m loan fund for SMEs to offset challenges posed by Brexit.

Irish Independent

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