INCREASES IN the two rates of income tax will be among the measures discussed by the Cabinet tomorrow when it starts work on devising the €4.5 billion package of spending cuts and revenue-raising measures which will be unveiled in an emergency budget on March 31st or April 2nd.
Green Party leader John Gormley said at the end of his party’s convention in Wexford yesterday the budget would present difficulties but with it would come opportunities.
It is expected that the standard 20 per cent tax rate and the 41 per cent higher rate will each be increased by 2 per cent. That would bring in around €1.5 billion in a full year. A new higher tax rate of around 48 per cent is also up for discussion.
The widening of the tax net to bring in people on lower pay who are currently exempt from tax was flagged by the Taoiseach at the recent Fianna Fáil ardfheis.
Because of the difficulties in changing tax rates during the tax year, the increases are likely to be collected by way of income levies in 2009 and incorporated into the tax rates in 2010. Changes in tax credits to raise extra revenue are also likely.
Hefty increases in the excise duties on cigarettes and alcohol are also likely, along with a carbon tax on petrol and diesel. VAT rates are expected to remain the same.
Other possible measures such as a property tax or the taxation of child benefit are not likely to be considered until the December budget, after the Commission on Taxation has reported. Cuts in most social welfare benefits are also regarded as unlikely in the emergency budget.
One welfare payment that could be cut or even abolished in the coming budget is the early childcare supplement.
Deep cuts in public spending across all Government departments will also feature and all Ministers will be expected to generate significant savings in their departments.
On the final day of their conference in Wexford, Mr Gormley and Green Party chairman Dan Boyle accepted next month’s budget will be difficult.
Mr Boyle said the total tax revenue for 2009 would fall back to 2003 levels, if no changes were made in the tax code. He compared this to the increase in expenditure since then.
“Since 2003, public expenditure has risen by 50 per cent,” he said.
In his leader’s address, Mr Gormley said he will ban donations to political parties from large corporations. He told delegates he will use his powers as Minister for the Environment to introduce “the most radical piece of legislation on political funding ever”.
“[The Greens] are not compromised and we will break the link between big business and politics,” he said.
Speaking on the economic crisis, he called for a new consensus approach: “I appeal to the Opposition parties to stop the bickering and the grandstanding and the opportunism. You know an election is not going to solve our economic woes. You know the same tough decisions will have to be made regardless of who is in government,” he said.
Mr Gormley also contended that Fianna Fáil was not the only party to take money from builders, and that Fine Gael and Labour had also done so.
In a separate development, TD Paul Gogarty will resign as his party’s education spokesman over a row about control of the party’s education policies.
