Sunday 17 December 2017

Families are enduring an average hit of €600 - with more cuts to come in budget

Picture posed. Thinkstock
Picture posed. Thinkstock
Charlie Weston

Charlie Weston

THE average family is almost €600 a month worse off due to the last four budgets -- and is facing a similar bill for the next four.

The austerity Budgets that began in 2008 have hit the average family take-home pay by almost €600 a month, with another four tough Budgets set increase the income cuts to €1,200 a month by 2015, new figures show.

The Irish Tax Institute research is the first time a formal financial assessment of the impact on families has been made. Families have been hit hard by income tax changes, cuts in child benefit, higher medical charges, reductions in pensions tax reliefs and government spending cuts.

The income-sapping Budgets have been imposed to balance the Exchequer books and pay for the bank bailouts.

Next month's Budget alone is set to hit households with hikes in VAT and carbon hikes and the new household charge.

The likely cost to the average family will be €1,000 after tax over a year. But there is more to come in a series of austerity budgets that will involve water charges, higher motor tax, cuts in child benefit, more income tax rises and an increase in the household charge.

The figures do not take account of a range of other income-reducing measures, such as pay cuts, public sector pension levies, phasing out of mortgage interest relief for most, cuts in unemployment benefit and higher DIRT savings tax.

President of the Tax Institute Bernard Doherty said families were fast reaching a point where they could no longer absorb the burden of spending cuts and tax hikes.

"The capacity for people to bear more pain is running out as we approach an overall tipping point in terms of the money that can be taken from them in tax."

He welcomed the promise by Finance Minister Michael Noonan not to hike income tax on Tuesday week, but warned that €1.6bn in other tax cuts in the Budget would be felt by every individual in the State.

Calculations by the tax body that represents and educates tax consultants show that the four brutal Budgets since 2008 have cost a one-income family on €55,000 close to €600 a year.

The average household had an income of €60,000 in 2008 but this fell to €56,000 in 2009, and then to €53,864 last year, according to separate Central Statistics Office figures.

For a two-income family on combined earnings of €70,000, the impact of the past four Budgets is more than €600.

The total tax measures in the last four Budgets amount to €4.9bn, with another €4.65bn in new tax-raising to be imposed over the next four Budgets.

Irish Tax Institute experts said it was not possible to say with any certainty how the €4.65bn in new taxes would impact on households.

But other tax consultants said that if households were again forced to bear the lion's share of the cuts and tax hikes in the next four Budgets, the average family will end up €1,200 a month worse off by 2015.

This is despite the fact that rising unemployment and an ageing population have left the Government with a falling number of taxpayers to fund the bank bailouts and the Exchequer finances.

Next month's Budget is set to hit households with a VAT hit on spending, with the top rate moving from 21pc to 23pc.

The new rate will apply to about half of all goods and services, and will mean this country will have the highest VAT rate in the eurozone.

Higher VAT is set to cost households around €500 a year.

The household charge will be unveiled in the Budget at an annual cost of €100.

Cuts in child benefit are likely to cost a family with two children €240 a year.

And hikes in carbon tax on petrol, diesel, gas and heating oil could add €200 to households' budgets over a year.

The following year's Budget is set to see water charges, more hikes in income taxes, changes to pension tax reliefs and further cuts in child benefit.

Greater focus should be placed on creating jobs rather than on increasing taxes on lower- and middle-income earners, the Irish Tax Institute said.

Irish Independent

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