Budget 2022: Minimal changes to income tax, price of alcohol unlikely to rise

There will be minimal changes to income tax in Budget 2022, while the price of alcohol is unlikely to be hit despite Ministers struggling to find alternative ways to raise money amid growing pressure on the public purse.

Minister for Public Expenditure Michael McGrath and Minister for Finance Paschal Donohoe have begun a series of bilateral meetings this week with other ministers, who are outlining their wish-lists ahead of budget day on October 12th.

The €4.7 billion package will be finalised the weekend after next but room for manoeuvre is limited with only around €1 billion available for new spending that has not already been committed to and €500 million available for new tax measures.

Almost half of the €1 billion could be taken up with welfare increases and changes, while there is pressure to use much of the remaining fund to tackle soaring waiting lists across the health service.

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While no final decision has been made in relation to the price of cigarettes and alcohol, sources said Government is keenly aware of the pressure on pubs and restaurants during the pandemic, so there was no desire to add to this by increasing the cost of alcohol.

However, sources have said it is becoming increasingly challenging to find a way to remain within the envelope available given mounting pressures and demands on the exchequer.

Potential difficulty

There have been discussions around what revenue raising measures the Government could introduce but officials believe there are very few that could be introduced without creating political difficulty.

The Government is also keen to focus on passing the planned increase in carbon taxes.

Revenue from these increases will likely fund any increases in the fuel allowance or changes to eligibility.

In terms of personal taxation, there will be little change as the focus will be on index-linking bands, a measure which will take up much of the available €500 million.

Speaking in Washington DC on Tuesday, Tánaiste Leo Varadkar confirmed most of the money for tax measures will be used to offset the impact of inflation on people’s take-home pay.

Mr Varadkar said the budget will be used to promote remote working and this would involve updating the scheme that sees workers supported for utility costs.

“We think is going to be a big part of the future and particularly can be beneficial in terms of work-life balance and also having more people living and working in rural Ireland,” he said.