Friday 19 October 2018

Budget 2016: Christmas bonus to be increased while cigarette prices will see rise of 50 cent

The deeply unpopular Universal Social Charge (USC) will be significantly reduced
The deeply unpopular Universal Social Charge (USC) will be significantly reduced

Kevin Doyle, Niall O'Connor and Ailish O’Hora

A €550 tax credit for the self-employed and an increase in the Christmas bonus for pensioners and the unemployed will be announced in Tuesday’s Budget, has learned.

The Christmas Bonus, axed during the recession, will be one of the key planks of Joan Burton’s Social Protection Budget.

The bonus, paid just days before Christmas, will see once-off payments of €173 per single person and €327 per couple.

A 50 cent increase in the price of cigarettes will be announced in a move that will raise over €60m in additional revenue to spend elsewhere.

Meanwhile, the so-called “Squeezed Middle” will take home an additional €1,000 in their annual pay after the Coalition’s announces its final budget before the General Election.

The deeply unpopular Universal Social Charge (USC) will be significantly reduced as the Government moves to phase out the tax by 2020.

A major package will also be announced aimed at ending the “unfair treatment” of the self-employed with a promised annual tax credit of €550, can reveal.

Finance Minister Michael Noonan and Public Expenditure Minister Brendan Howlin will deliver the taxation and spending measures from 2pm on Tuesday. 

Senior Government sources say the €1.5bn package will ensure “every household and family” in the State will benefit.

The Budget will be pitched heavily at families and will deliver a five euro increase in child benefit, a cut in the pupil-teacher ratio and the introduction of free pre-school for children aged between three and five years.

A 50 cent increase in the minimum wage will also be introduced, while a major package aimed at farmers is to be unveiled also.

The Budget will also include:

-          An increase to the inheritance tax threshold from €225k to €280k

-          An entrepreneurial package aimed at attracting 70,000 emigrants home

-          Two weeks paid parental leave for fathers

-          The delivery of 20,000 homes by 2020 through NAMA

-          The full restoration of the respite grant for carers.

In terms of healthcare, Health Minister Leo Varadkar has secured an additional €200m in funding – which will be followed by a €600m supplementary budget partly aimed at resolving the trolley crisis.

Justice Minister Frances Fitzgerald has secured at least 600 additional garda places and extra money for new staff in the courts service.

There will also be a boost for hauliers who will pay less tax following changes to the tax code.

A major package for the elderly will also be announced.

Some €600m of the €750m available to Mr Noonan will be used to slash the deeply unpopular Universal Charge (USC).

As part of a suite of measures, the point at which workers begin paying USC – which is currently set at €12,012 per annum – will be increased by €1,000. This will take thousands of low income earners out of the USC net.

There will also be cuts to the rates applied to workers’ incomes. The top rate of 7.5pc, applied to earnings of between €17,500-€70,000, will be cut to 6pc.

The lower rates of 3.5pc will be reduced to 3pc and the 1.5pc rate will be slashed to 1pc.

Government sources say the cumulative effect of the changes to the tax system will see middle income earners take home an additional €1,000 per annum.

The major cuts in USC will be combined with the announcement that the deeply hated tax will be axed entirely by the end of 2020.

Mr Noonan will use his speech to pledge that the benefits of the recovery will be spread to “every household and family” in the State.

Meanwhile, talks between Environment Minister Alan Kelly and Mr Noonan aimed at securing a"rent certainty" agreement have broken down.

In a blow to Mr Kelly, the Labour Party deputy leader has failed in his bid to link rent to inflation over a four year period. The breakdown in talks has caused surprise within the coalition.

One source told the Irish independent that tensions between the two ministers are "at the extreme."

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