- European Union - financial crisis - IMF - Ireland
Troubled Irish govt unveils four-year austerity plan
Irish Prime Minister Brian Cowen revealed on Wednesday a four-year austerity plan for Ireland that includes raising sales taxes, but keeping the current tax rate on business profits, as the government looks to save 15 billion euros by 2014.
AFP - Ireland maintained its low corporation tax rate on Wednesday but outlined plans to overhaul income and sales levies as the debt-laden eurozone nation braced for a multi-billion-euro EU-IMF bailout.
Irish Prime Minister Brian Cowen presented a series of tax rises and cuts to public sector pay, pensions and social welfare in a bid to slash a huge deficit and save 15 billion euros (20 billion dollars) by 2014.
The once-proud Celtic Tiger is desperate to win an enormous bailout of up to 85 billion euros from the European Union and the International Monetary Fund to help haul it out of a debt crisis.
"This plan reaffirms the government's unambiguous position on the maintenance of the 12.5 percent rate of corporation tax," the government said in a key budget statement.
"This is a cornerstone of our pro-enterprise, outward-looking industrial policy and has remained consistent over successive administrations."
Ireland's corporation tax on company profits is one of the lowest in the world, which contributed to the so-called Celtic Tiger boom before the economy crashed dramatically in 2008 in a banking-sector crisis.
Many European nations, where such taxes are much higher, want the levy to be lifted in return for an international bailout.
Cowen on Wednesday said the government's tax revenues had plunged by more than a third since 2007, while the gap between receipts and public spending would stand at 18.5 billion euros this year.
He unveiled plans to overhaul income tax to raise 1.9 billion euros, while the government will also increase the level of value-added tax (VAT) from 21 percent to 22 percent by 2013, before again raising it to 23 percent in 2014.
The changes in VAT, which is levied on goods and services, will yield 620 million euros, the government said.
"Tax receipts in 2010 will be around 35 percent lower than in 2007, the steepness of the fall reflecting the over-dependence on property and construction-related revenue sources during the boom years," it added.
The statement said that almost half of income earners would pay no income tax this year -- a situation the government described as "not sustainable."
"A fundamental principle of the reform outlined in this plan is that all taxpayers must contribute according to their means. Those who can pay most will pay most but no group can be sheltered," it added.
Ireland's taxation revenues were slashed by a vicious recession and a property market meltdown, while finances were also ravaged by series of costly bank rescues arising from the global financial crisis.
Despite the prospect of an international bailout, the government maintained its economic forecasts for average gross domestic product (GDP) growth of 2.75 percent between 2011 and 2014.
However, the bullish forecast was in stark contrast to a prediction from ratings agency Standard & Poor's.
S&P said on Tuesday that it "now expects close to zero nominal GDP growth for 2011 and 2012. We do not envisage GDP exceeding 2.0 percent a year in real terms before 2013."
The ratings agency also lowered its short and long-term credit ratings for the Republic of Ireland by a notch, and placed it on credit watch.