Tuesday 17 September 2019

Stealth taxes to pay for income tax cuts and welfare package

  • Wave of hikes to pay welfare bill

  • Minister 'will not support Budget'

  • Brexit threat keeps 9pc VAT rate

BUDGET: Finance Minister Paschal Donohoe. Photo: Gareth Chaney Collins
BUDGET: Finance Minister Paschal Donohoe. Photo: Gareth Chaney Collins
Philip Ryan

Philip Ryan

Minister for Finance Paschal Donohoe is considering a raft of new stealth taxes to pay for income tax cuts and a massive €450m welfare package, the Sunday Independent can reveal.

Mr Donohoe is understood to be examining the possibility of hiking carbon taxes, excise duty on drink and cigarettes, increasing the bank levy and changing the VAT rate for certain products and services in Tuesday's Budget.

The vacant site levy will increase and bar and hotel owners could be hit with increases in liquor licence fees.

The revelations of new taxes come as it can also be revealed that Disability Minister Finian McGrath dramatically told Mr Donohoe he would resign from Cabinet if his Budget demands were not agreed before next Tuesday.

During a heated meeting in the Department of Finance, Mr McGrath told the minister and his officials that he would step down if he did not get more funding for people with disabilities and those living in poverty. The Independent Alliance minister is understood to be furious with the lack of compromise by Mr Donohoe and his officials on key areas of spending he has sought during Budget negotiations.

Contacted last night by the Sunday Independent, Mr McGrath confirmed he was willing to resign from Cabinet.

"I will not be able to support the Budget and I am prepared to resign if there is not more movement in the coming days in the areas of disability and people living in poverty," Mr McGrath said.

USC cuts and changes to income tax bands are expected to cost around €300m. The confidence and supply agreement insists on a 2:1 split on spending and tax cuts meaning €600m will have to be allocated to investment. The Government has committed to balancing the books in this Budget so additional funding will have to come from revenue raised through taxes.

The Sunday Independent has learned the entire cost of the social welfare package being discussed by the Government could come to €450m.

An increase of €5 a week on the pension will cost €150m, while the same increase on all other welfare payments totals almost €200m.

The reintroduction of the €850 bereavement grant is also on the cards.

Social Protection Minister Regina Doherty also wants to introduce a €75m package to help lone parents who are living below the poverty line.

Department of Social Protection discussions are expected to go right down to the wire again this year as all sides battle to stake their claim on the welfare package.

Fianna Fail is pushing on increases for pensioners, carers and people with disabilities. The party is not demanding an increase in dole payments but Fine Gael believes all welfare benefits should be increased.

Meanwhile, Mr Donohoe is desperately seeking to establish revenue-raising measures to pay for the growing demands from his ministers, the Independent Alliance and Fianna Fail.

Senior Government figures would not confirm what taxes will be increased or what new charges may be introduced as negotiations are ongoing.

The 9pc VAT rate for the tourism industry will not be changed in this Budget due to concerns over Brexit but hotels and bars could be hit with an increase in liquor licensing fees.

Stamp duty on both commercial and residential properties could also be increased. The vacant site levy will also be increased to put pressure on land owners to use or sell their land.

A sugar tax will also be introduced and it is expected to raise around €40m in a full year - but it is not expected to be brought in until April at the earliest. Products covered by the zero rate or reduced rate of VAT could see their status changed to increase taxes.

Fianna Fail is seeking to distance itself from the taxes being raised by the Government to pay for their demands. "There are no votes in raising taxes," a senior party source said.

Talks between Mr Donohoe and Fianna Fail and the Independent Alliance will continue today and tomorrow.

Transport Minister Shane Ross has secured €50m for cycle paths and other infrastructure relating to cycling over the next four years, to make Dublin and other cities more friendly to cyclists.

It is also hoped the spending will help Ireland meet its environmental targets. "We are determined to extract enough capital to take a major and permanent initiative in the cycling area," said Mr Ross. "It is imperative that congestion in Dublin and the other major cities is reduced, safety improved and emissions are slashed."

Mr Ross is still seeking to secure a tax relief for grandparents who look after their grandchildren while their parents are in work.

The health budget has also been signed off and it is understood Minister for Health Simon Harris received increased funding. Discussions around health charges are ongoing but it is understood the Government is considering reducing the prescription charge by 50c to €2 per item and decreasing the maximum for the drugs payment scheme by €10 to €134.

A senior Government source said when tax relief is taken into account, no family should pay more than €100 a month for medicine. If the measures are introduced it would represent a saving of €180 a year to hundreds of thousands of people who are on regular medication.

The Budget will also have a strong focus on infrastructure investment in new roads, schools and housing.

Sunday Independent

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