Noonan gambles with new tax rises

The Government has taken a gamble on economic recovery after unleashing a slew of indirect taxes hitting every aspect of daily life.

With vulnerable families and the disabled reeling from multi-million euro benefit cuts, shoppers, motorists, savers and investors were hurled into the firing line of tax hikes.

Finance Minister Michael Noonan claimed the €1bn revenue raising package would penalise the wealthy while 330,000 part-time workers were spared the Universal Social Charge.

But critics attacked the austerity measures – the second half of a two day budget to save €3.8bn – claiming the Government could not tax its way out of the economic mess.

Major reforms included an expected 2% VAT hike, a savage 60% motor tax increase for the greenest vehicles and new levies for any employees holding property or share investments.

Mr Noonan accepted his tax and spending cuts strategy is far from certain.

“They may not all work. But some certainly will,” he said.

Mr Noonan set out the gamble of Budget 2012 – to give consumers a choice – and defended his plan to protect wages from further income tax and levies.

“Wages and salaries in January will be no less than wages and salaries in December, so people will continue to have discretion on how they spend their income,” he said.

“Indirect taxes have a lower impact on economic growth and on jobs.”

The fallout was immediate as the Government suffered the loss of its fourth backbencher in the last weeks and newly elected Labour TD Patrick Nulty refused to support the budget.

One of the most significant reforms was to ease the burden on the lowest paid. New thresholds for the Universal Social Charge – a levy on virtually all income - will free part-time workers earning less than €10,000 from the levy and leave them €4 a week better off.

But the pain is being felt most in large families as they count up the impact of child benefit cuts followed by a four cent rise in petrol and diesel from January 1 and a €100 property tax.

Motorists have also been punished after answering pleas to go green with tax on the lowest-emission cars up about 60% – Band A up to €160, Band B up to €225 , and Band C up to €330.

The old reliables were hit by 25 cent on cigarettes and the 2% VAT rise on alcohol as well as looming reforms on supermarkets selling below cost.

The carbon tax will also hit drivers from midnight tonight – petrol up 1.4 cent a litre and diesel 1.6 cent and while households using coal and peat were saved, 1,000L of home heating oil will go up next May by €14.40.

Several initiatives were announced to target wealth – a new levy under Pay Related Social Insurance for workers who have a rental income or stocks and shares; increases in capital gains and acquisitions taxes by 5%; and a 30% Deposit Interest Retention Tax.

Over the last four years of five austerity budgets the impact of cuts has hit large families the hardest – net incomes are down 9%.

Michael McGrath, Fianna Fáil finance spokesman, accused the near nine-month-old coalition of reneging on it election promises.

“Now that you’ve shown your hand, the Irish people have been left bitterly disappointed,” he said.

Mr McGrath also lashed out over an €88 cut in some disability allowances claiming it would only save €7m.

“It is a heartless and cruel cut,” he said.

Pearse Doherty, Sinn Féin finance spokesman, accused the coalition of going at the economy with a wrecking ball which has hit the worst off in society.

“You plan to bring in three more years of cuts budgets, in the face of all the evidence that they will not work,” he said.

“Despite all your bluster in opposition, the minute you arrived in Government Buildings, you wrapped yourself in the Fianna Fáil flag and continued to sell this state down the river. You do not care about the effects of austerity.”

Amid fierce opposition condemnation, Labour rebel Mr Nulty, 29 and only elected in Dublin West last month, accused the Coalition of failing to go after the wealthiest in society.

Attempts were made to spur the property market into life but would-be buyers still face banks unwilling to lend. There is mortgage relief for first time buyers who joined the market in the boom years of 2004-2008 while capital gains tax on property bought between now and 2018 is being abolished.

Stamp Duty Will be reduced from 6% to 2% for commercial property and non-residential property transfers, including farmland.

David Begg, Irish Congress of Trade Unions chief, said an opportunity had been lost to increase taxes on people earning more than €100,000.

“Budget 2012 has failed to lift the dead hand of austerity from the economy and has done absolutely nothing for jobs,” the union leader said.