Tuesday, October 14, 2008

Irelands Harshest Budget in living memory-Taxpayer and Consumer blues.

This budget was set against the background of a horrific deterioration in the public finances caused by the bursting property bubble in Ireland and by international factors. In the two budgets prior to the 2007 general election the FF/PD government allowed public expenditure to grow by 25%. This growth in public expenditure was supported by huge tax inflows from the property sector. Now that these have largely dried up the Government was left high and dry. The Government is now heist on its own petard.
This was an accident waiting to happen. Taxes from the property market are notoriously unreliable.

This is the harshest budget in living memory. Even to outline some of the harsh measures sends a chill through the bones.
There are some minor beneficial changes in Social Welfare Payments and Tax Bands allied to provisions geared towards innovation and R and D. There are some aids for the property market. However this is a TAKE budget which will raise an extra €2 billion in taxes. Government Borrowing is forecast at 6.5% of GNP. This is much too high. The EU requirement is 3%. In essence the Government must borrow €13 billion.

Income tax has been increased. A levy of 1% has been placed on all income up to €100,000 and at 2% on earnings over €100,0000. This is an income tax rise by another name. The PRSI ceiling has been raised also. Mortgage relief for non-first time house buyers has been cut from 20% to 15%. A €200 tax has been introduced on all benefiting from employer provided car parking in urban areas. Motor Tax rises by 4%/5%. Those who own a second property face a new € 200 tax. DIRT ,Capital Gains Tax and VAT have been raised.

The government has cut back financial support to local authorities so a massive hike in commercial rates and water rates will filter through.

Automatic entitlement to a Medical Card for all over 70s has been withdrawn. There is to be a 20 % increase in private and semi-private bed charges in public hospitals and Accident and Emergency charges are to increase by 50% from €66 to €100 for non medical card holders who attend A&E departments without a letter from their GP. The Drug Payment Scheme (DPS) threshold is being increased from €90 to €100 per month which, the Government says, will lead to savings of €15 million in drug costs.

The Registration Charge for Universities has been raised from €900 to €1500. The pupil teacher ratio in schools has been increased.
Petrol will rise by 8 cent per litre.
The budget will cost middle-income families an average of €2,500 per annum. There will be a €10 airport charge for passengers.
There are also some social welfare cutbacks.
The hair-shirt is back in Irish politics with a vengeance. It is likely that consumer confidence has been severely dented. In addition it is probable that two more harsh budgets may be in the offing.


rainywalker said...

Very fine, but sad blog. What will the Irish people do that are over 70 and don't have a medical card? Do without, or pay out of pocket?

The 8% increase in petrol, is that a tax or just an increase in cost?

I learn many new words from your blog and so far they have all been in my dictionary.

John Barry said...

If you require a medical card you will be means tested. Prior to now everyone over 70 was entitled to a medical card irrespective of means. Even millionaires were entitled to have one. This scheme was brought in a few years ago. The 8 cent per litre rise is a tax rise. The average price of a litre of petrol (gasoline) is around 1.22 euro at present.(100 cents=1 euro) It varies from station to station. Thus the rise is approx 6.5% . 1 Euro = 1.3739 U.S. dollars

rainywalker said...

Our utilities gas, water and electric is scheduled to increase 23% I believe the 1st of November.
Then there are the issues on the ballet that are tax increases that may or may not pass. They tend to call things fees now instead of tax. On the telephone bill there are some 10 fees which end up being around $14.00 [dollars] per month. Thank you for the information.

rainywalker said...

If my comment about words offended you I apologize, it was not meant in jest. We both use words and phrases that are different and no offense was meant.

John Barry said...

I did not take any offence at all.
Incidentally the withdrawal of the guaranteed medical card for over 70s has caused uproar. Many old people who had been paying health insurance to companies such as VHI withdrew from private schemes as they were guaranteed free state care. Now many will be stranded if they fail to qualify for the means tested state scheme. If they rejoin private company schemes they will have to wait 10 years before they can benefit. So that is pointless. Many old people are terrified.