No attempt made to address pensions inequity in Budget 2022

While the National Minimum Wage will go up to €10.50 in January, this will not be much use to lower paid workers

Tue, 12 Oct, 2021 - 18:51

Neil McDonnell

Perhaps it is a function of modern coalition government, but there were no real surprises on budget day.

The taxation package was mostly leaked, the capital expenditure programme was all announced in the National Development Plan, leaving little for budget day.

There is never an easy time for tax reform, and the coalition has the excuse of the current Commission on Taxation and Welfare to point to, but we had expected more. We salute the Government’s resolution on corporation tax, and we should regard that as off the table for the foreseeable. But other areas of taxation need urgent attention.

The move to lift income bands for PAYE is long overdue. Workers previously paid tax at the marginal tax rate at earning €5,693 below the current average industrial wage of €40,993. The lift in the cut-off to €36,800 still means paying top rate at €4,133 below the average wage.

ISME proposed a “solidarity tax” for PAYE workers earning over €100,000 to match the 3% USC surcharge levied on the self-employed. This has not been taken up.

The 3% levy on zoned land is welcome, as at least an attempt to reform our property taxes, and it sounds like ISME’s use-it-or-lose-it tax.

The failure to lower capital gains tax is a missed opportunity to raise the current yield from this tax.

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There has been no attempt to address pensions inequity between public and private sector workers. The “political rich list” produced recently shows why public service reform is so hard to achieve in Ireland. We’ve heard of politicians threatening to sort out the “gold-plated” pensions available in the private sector, as if every worker is a senior counsel or an orthopaedic surgeon.

Yet, the average private sector pension pot in Ireland is €126,000. At current rates of return, a pensioner with this average pot would be lucky to draw a pension of €3,150 per year. This gulf of inequality must be closed by Government.

Budget 2022 did nothing for private sector pensioners.

While the National Minimum Wage will go up to €10.50 in January, this will not be much use to lower paid workers. We sought a more meaningful package for the lower paid.

This included the elimination of the high marginal rate of PRSI on income in the PRSI Transition Zone from €18,000 to €22,000; and replacing the child element in jobseeker’s payments and all other welfare schemes by increasing Child Benefit, phasing out Working Family Benefit, and at the same time making the Child Benefit taxable.

From an enterprise perspective, the Employment and Investment Incentive (EII) scheme, R&D tax credit, Knowledge Development Box and the Key Employee Engagement Programme (KEEP) all need substantial amendment to make them relevant and usable for the small enterprise sector.

There is a welcome use-it-or-lose-it tax on zoned land, but more reform is necessary on all property taxes.

If Sláintecare is to continue then the Sláintecare Implementation Advisory Council (SIAC) needs to include a Lean Sigma Black Belt with knowledge of the healthcare sector, and it needs to recruit a health economist. It also requires board-level senior management experience from the services sector.