‘Unavoidable’ tax increases on the cards in Budget 2023, claims Social Justice Ireland

Tax increases will be “unavoidable” in coming years to even maintain pre-pandemic levels of public services, equality think tank Social Justice Ireland (SJI) has said.

Its Budget Choices 2023 submission says meeting social needs in the period to 2030 will require a doubling of social housing targets as well as radical interventions like legislation prohibiting the sale of public land which could be used for social housing, the introduction of a €20 weekly cost-of-disability allowance and a higher ‘living wage’ of €12.90 per house than the €12.17 proposed by Government.

“The fiscal context for Budget 2023 is one of the most difficult in some time due to an uncertain social and economic outlook,” said SJI director Fr Seán Healy. “The budget must respond to the current cost of living challenges but also recognise uncertainties, including the ongoing impact of Covid, the Russian invasion of Ukraine and spirally cost-of-living increases.”

The impact of these was felt most keenly, he continued, by the poorest 20 per cent of the population. “They spend a greater proportion of their income, compared to better off households. They are more exposed to price increases and spend a greater proportion of their income on food and energy,” he said.

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SJI warns that the Government must “avoid using taxation measures as a means of providing short term solutions to the cost-of-living challenges all of society now faces”.

“Reductions in income taxes, indirect taxes, excise duties and levies represent poorly targeted measures and should be avoided,” it says, adding that the best-off households had benefited from recurring decreases in income taxes since 2014.

Over the course of budgets 2021 and 2022, SJI says, tax changes delivered gains ranging from “a mere 39c per week for low income couples on €30,000 to €16.11 per week for couples with incomes over €80,000″.

Budget 2023 needs to maintain most current income-taxes, while delivering increased taxes on wealth and some commercial activities, and an effective corporate tax rate of 6 per cent — as a start towards an effective rate of 12.5 per cent.

Measures should include a minimum effective tax rate of 32 per cent for those earning €400,000 or more; a €500 per year tax on second homes; an increase in capital gains and capital acquisitions taxes from 32 per cent to 35 per cent; a stamp duty increase from 7.5 per cent to 8 per cent on investment properties, and refundable tax credits for those workers who earn too little to pay tax — so they can benefit from the value of credits.

Social housing targets set in the Government’s Housing for All strategy should be doubled. While 9 per cent of housing stock here is owned by local authorities or approved housing bodies, in other European countries the proportion is 20 per cent. Achieving this will require spending an additional €3 billion on social housing next year, rather than the planned €1.4 billion.