Taxpayers, motorists, and renters are the big losers in Budget 2020 as they paid the price for the Government’s need to Brexit-proof the country.
After a day of heightened tensions and rhetoric between Downing St and the EU, Taoiseach Leo Varadkar warned last night a deal is not likely.
“I think it’s going to be very difficult to secure an agreement by next week, quite frankly,” he said.
Mr Varadkar and British prime minister Boris Johnson spoke for 45 minutes and agreed to meet again face-to-face this week to avoid to a crash-out Brexit. The Taoiseach said he is willing to continue talking, “but not at any cost” saying Ireland’s fundamental interests must be protected.
Finance Minister Paschal Donohoe said Brexit was the “most pressing and immediate risk to our economy” and announced a €1.2bn package to tackle the “increasing likelihood” of a disorderly exit.
As a result, there were no across the board personal income tax cuts, welfare increases or aids for renters while a €6 per tonne increase on fuel came in from 12 midnight.
Mr Donohoe said last night that were Fine Gael returned to power, a yearly increase of €6 per tonne in carbon tax would be likely in successive future budgets.
John FitzGerald, chairman of the Climate Change Advisory Council, said the carbon tax rise to €26 per tonne was disappointing as the council had called for a €15 per tonne increase.
In his speech, Mr Donohoe said:
Mr Donohoe’s €2.9bn net budget package also includes a €1.1bn allocation to build more than 11,000 new social homes next year.
There are no changes to income tax or Universal Social Charge bands but the self-employed tax credit will increase by €150 to €1,500.
Free GP care will be extended to children under eight and dental care for children under six from September.
Of the €90m to be raised by the increased carbon tax in 2020, Mr Donohoe said it will be ringfenced to pay for climate actions measures.
He said a new energy efficiency scheme targeted at social housing stock in the Midlands would be created as would a “just transition fund” will be allocated €6m to help those communities. A “transition commissioner” would be appointed shortly.
The 1% diesel surcharge introduced last year will be replaced with a nitrogen oxide emissions-based charge. This surcharge will apply to all passenger cars registering for the first time in the State from January 1, 2020.
The rate of stamp duty applicable to non-residential property transactions will increase by 1.5 percentage points to 7.5% from 12am, in a move that Mr Donohoe says will bring in almost €140m.
Responding to the budget, Green Party leader Eamon Ryan said: “It was a status quo budget from a status quo government.
Labour Party leader Brendan Howlin said the poorest cohort of people across the country will be worse off as a result of this budget.
“That’s simply unacceptable,” he said.
Meanwhile, the Department of Finance warned the country faces a €6bn hole in the public finances if there is a “shock” to the corporate tax take.
The stark warning reveals nearly half of all corporation tax is paid by just 10 companies, such as Google, Apple, and Facebook.
“This, of course, makes our public finances vulnerable to policy changes in other jurisdictions and to sector and company-specific shocks,” Mr Donohoe said in the forward to the report.
The report also warned that we cannot use revenue streams which may prove “transient” to finance permanent increases in public expenditure.
By the end of last year, around €1 in every €5 collected in tax was paid by the corporate sector, an amount which has doubled in the past decade.
“It corporation tax receipts fell back to 2014 levels, ie the level immediately prior to the surge, this would imply a revenue loss of around €6bn,” said Mr Donohoe.
“These are very significant amounts of money and, now that the headline deficit has been eliminated, we need to build on measures already in place to address these potential risks.”
Earlier, Tánaiste Simon Coveney hit out at Brexit “misinformation” now being circulated by Downing St to the UK media.
It came as Downing St sources told a British media outlet that the Taoiseach “doesn’t want to negotiate” a Brexit deal adding that talks are likely to collapse later this week as a result.