Hard-working families are set to be up to €600 a year better off on foot of tax breaks and spending increases announced in Budget 2018 by Finance Minister Paschal Donohoe, writes Political Editor Daniel McConnell.
Mr Donohoe announced new spending totalling €1.2bn for next year which included cuts to the universal social charge (USC), as well as an increase to the entry point at which the higher rate of income tax is paid.
Despite the increase, the Opposition was critical of his decision to cut taxes as opposed to spending more money on dealing with the homelessness crisis.
As well as a significant €685m increase in health spending, the minister also announced an increase of €5 to all main social welfare benefits including jobseekers, carers allowance as well as the old age pension from March.
These new spending commitments will be paid for by almost €600m in new tax increases.
The most controversial aspect of Mr Donohoe’s budget package was a decision to triple stamp duty on commercial property from 2% to 6%, which he said would raise €376m next year.
He rejected opposition claims that this was a return to the boom and bust tax policies of former Fianna Fáil finance minister Charlie McCreevy, as suggested by Labour leader Brendan Howlin.
“Using property based revenues to reduce income taxes is incredibly unwise. Echoes of McCreevy economics,” said Mr Howlin.
Speaking to the Irish Examiner, Mr Donohoe strongly rejected this, saying that he was broadening the tax base and that he was confident the move would deliver the estimated amount.
“What we are doing is broadening the tax base, which is the very opposite of what was done in recent years,” he said. “I am increasing stamp duty on commercial property back to where it was before. The overall gain from that is just under €400m.
“We are looking to expand the tax base. I am confident, if you look at the pipeline of projects, I am confident that it will yield a revenue stream that is stable into the future.”
A sugar tax on sweetened drinks, to come into effect April, with 30 cent a litre put on those with more than eight grams of sugar per 100ml and 20 cent a litre on drinks with between five and eight grams per 100ml. This is set to raise €40m.
Mr Donohoe also announced that 50c will be added to the price of cigarettes, taking the price of a standard packet of 20 to about €12 — one of the highest in Europe.
In a bid to slash skin cancer rates in Ireland — which are among the highest in the world — Vat on sunbed services is to soar from 13.5% to 23%.
Mr Donohoe said that a “rainy day” fund is being created to protect against future downturns with an initial €1.5bn deposit and €500m a year from 2019.
He also confirmed a freeze on the reduced tourism and hospitality Vat rate of 9%. There had been speculation of an increase in the rate.
Meanwhile, there was stinging criticism from the Opposition at the revelation that Mr Varadkar’s much-criticised Strategic Communications Unit will cost €5m next year.
This is despite statements in the Dáil that the unit would not lead to any additional cost.
Mr Howlin said the revelation was “extraordinary”.
“This is extraordinary. Taoiseach told the Dáil this would be cost-neutral. €5m could have increased book rental funding by a third,” he said.
In response to the criticism, a spokesman for the Taoiseach said the unit will become cost-neutral.
This article first appeared in the Irish Examiner