Tuesday 23 January 2018

Noonan cuts USC, inheritance tax and Dirt in 'catch-all' plan

FG TD Kate O’Connell with her daughter Dorothy, who was celebrating her first birthday, at Leinster House. Photo: Gareth Chaney/Collins
FG TD Kate O’Connell with her daughter Dorothy, who was celebrating her first birthday, at Leinster House. Photo: Gareth Chaney/Collins

Kevin Doyle and Niall O'Connor

Finance Minister Michael Noonan is to make a series of small tax cuts in a gamble aimed at producing a 'catch all' Budget.

The Irish Independent can reveal Mr Noonan will cut USC on income up to €70,000, reduce Dirt tax for savers and increase the thresholds for each category of inheritance tax.

The minister is hoping that by giving a little something to everybody he will win over voters and placate Fianna Fáil whose support he needs to pass the Budget.

On the other side, cigarettes will go up by at least 30 cents but there will be no hikes to petrol, diesel or alcohol.

Funding has also been agreed for 1,000 new nurses, 800 gardaí and 650 teachers.

Cabinet minister met last night to agree the broad parameters of Budget 2017 - but negotiations involving a number of ministers will go into the weekend.

Read More: When two parties write the Budget, who really owns it?

Mr Noonan is still tweaking his taxation package but is now understood to have accepted that, in order to give something to the so-called squeezed-middle, he will have to cut the three lowest rates of USC.

The 1pc, 3pc and 5.5pc rates will all be reduced by 0.5pc, meaning a worker earning €70,000 will gain around €350 in their annual take-home pay.

A person earning €50,000 will have an extra €260 in their pocket.

On inheritance tax, Mr Noonan has given in to demands from Fianna Fáil that threshold changes would go beyond just parents and children.

The minister had intended to increase the tax-free threshold for parents passing assets to children from €280,000 to €320,000. However, he will reduce the scale of this increase to around €30,000, leaving some money to also give a pro-rata tax break to other relatives and strangers who are bequeathed property in a will.

The inheritance tax rate of 33pc will remain unchanged.

Sources also confirmed that there will be a small reduction in Dirt, which currently stands at 41pc.

It is understand the money available to the Government may now be slightly larger than the €1bn that has been repeatedly signalled. It is understood the total budget will be just under €58bn.

While most of the tax measures are now tied down in principle, Public Expenditure Minister Paschal Donohoe is facing into a heavy weekend of meetings with ministers and Fianna Fáil.

It had been thought that Mr Noonan would double the Earned Income Tax Credit for self-employed workers, but sources indicated that the increase would be less than €550.

Capital Gains Tax for start-up enterprises will be halved to 10pc on the first €10m of income.

Read More: Varadkar stuns FG with last-ditch benefits plea

There will be no sugar tax or 'Rainy Day Fund' next year - but Mr Noonan is likely to indicate that both are in his plan for 2018.

The allocation for the Department of Health, which is normally problematic, has been finalised with Simon Harris getting a €250m increase on 2016.

As part of this, 10,000 children in receipt of the Domiciliary Care Allowance will get a medical card, as demanded by Independent Alliance's Finian McGrath.

However, talks between Fine Gael and the Independent Alliance were adjourned last night without overall agreement.

Taoiseach Enda Kenny and Mr Donohoe were given a list of demands including an extension of the VAT refund for house refurbishments for a further two years, an expansion of the rural social scheme, a better package for carers, an enhanced sheep grant for next year and a guarantee that the €15m funding for the National Treatment Purchase Fund (NTPF) would be spent straight away.

Irish Independent

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