The Government is set to benefit from an unexpected €100m income boost this year due to a tax most people do not even know they are paying.
Finance Minister Michael Noonan and Public Expenditure and Reform Minister Brendan Howlin confirmed the bonus pay day as they announced the last Exchequer figures before the Coalition’s final pre-election budget yesterday.
The detailed accounts show the State took in €1.74bn more in revenue at the end of September than it predicted last year, a 5.8% boost that has strengthened the Government’s hand in the lead-up to the imminent general election and in its insistence the economy is growing steadily.
The records also show €12.4bn was collected in income tax in the first nine months of the year, up 5.7% on 2014 due to rising job levels, and that Vat receipts are up €742m on last year, to €9.7bn, in a further sign of an improving economy.
However, while interest in the figures has been focussed on how the extra funds will be spent — with the shoring-up of the health budget this year and an increase of next year’s budget to €1.5bn likely — officials have also noted the Exchequer figures include a €100m windfall most people did not even realise they were paying.
Under EU tax rules quietly announced last year, since January all online music, movie, and ebook downloads have been taxed at the Vat rate of the country where purchases took place.
The decision was signed into law to prevent companies from officially registering sales in low-tax EU nations such as Luxembourg to avoid additional costs.
Between December 2014 and last month, the new rule has helped boost State funds by €75m as people purchasing products in this country are hit with extra fees linked to the Vat deal.
With the popularity of downloads continuing to rise, Department of Finance officials confirmed yesterday that the figure is likely to hit €100m by the end of this year, providing a substantial boost for the exchequer as the general election draws near.
The income increase is set to lead to further questions over whether the TV licence system should be adapted to take account of increasing numbers of people using computers and other devices to access programmes — an issue outgoing Labour TD and ex-communications minister Pat Rabbitte has warned is losing the Exchequer funds.
Meanwhile, a leading economist has questioned whether the Coalition is set to break its own commitment to limit the giveaway budget later this month.
Conall Mac Coille, chief economist at Davy Stockbrokers, said that proposed supplementary budgets to meet overspending in health (€350m-€600m), transport (€100m) and education (€50m) outlined at the Exchequer announcement yesterday could have carry-over effects into the 2016 budget.
While Mr Noonan and Mr Howlin hailed the improving economic scenario and the fact the pace of the economic recovery means Government will have €2bn in extra funds by the end of the year, they stressed the extra money will not mean the coalition breaks its promise to limit budget spending next year to €1.2-1.5bn.However,
Mr Mac Coille said the planned health supplementary budget “means the total stimulus to the Irish economy next year is now likely to exceed €2bn, or approximately 1% of nominal GDP, larger than we had previously thought”.
as supplementary budgets this year will “lock in a high level of spending and that is a change in policy”.
Hope was offered to thousands of mortgage customers critical of their treatment by their lenders as the Central Bank said it was widening its probe into potential bids by banks to unfairly encourage customers to abandon cheaper tracker mortgages for less favourable contracts.
It follows July’s disclosure of the extent of the Permanent TSB scandal, where senior directors admitted pursuing customers through the courts even though the bank failed to keep them on lower tracker rates.That scandal followed a Central Bank probe and involved 1,372 mortgage accounts from 2006 to 2011. Some 61 people needlessly lost their properties. Last night, a Central Bank spokesman said the probe was being extended to a number of banks. “Notwithstanding the considerable work undertaken to ensure consumers are appropriately protected, we remain concerned that there may be other tracker-related issues which could be impacting on consumers across the system,” the Central Bank said. Fianna Fáil Finance spokesperson Michael McGrath said that lenders cannot be relied on “to put their own house in order.” The Permanent TSB case “may only have been the tip of the iceberg in relation to this scandal,” Mr McGrath said.
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