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Business

Ireland's 'demanding' 2011 budget

©

Text by REUTERS

Latest update : 2010-12-09

Ireland’s government has unveiled a record austerity budget to save a total of 15 billion over the first portion of the four-year plan. A look at some of the details of the announced spending cuts and tax adjustments.

TAXATION  

INCOME TAX: Lenihan said the top rate of income tax -- when levies introduced last year are abolished and folded in -- will remain at 52 percent with a reduction in the value of income tax bands and tax credits instead yielding additional revenue of 395 million euros and 435 million euros apiece.
 
'Poor public policy helped fuel the Irish crisis.'
TAX RELIEF: The abolition and restriction of a number of tax reliefs -- including property-based legacy reliefs -- will yield some 150 million euros extra next year and help to draw a line under the tax breaks for high earners that helped fuel Ireland's property and spending boom.
 
ENERGY TAXES AND INCENTIVES: Pending the approval of parliament later on Tuesday, the price of petrol will increase by 4 percent and diesel by 2 percent from midnight and yield 106 billion euros extra in government revenue next year.
 
Standard rated tax relief will be available on expenditure up to 10,000 euros on a list of approved energy-saving works on homes. The total relief available under the scheme in any one tax year will be 30 million euros, which would allow for remedial works to be carried out on a minimum of 15,000 homes.
 
AIR TAXES: Lenihan said the state would take a one-off 56 million euro hit by reducing the air travel tax to 3 euros from 10 euros. However he warned airlines that the reduction in the tax should not be used as an opportunity to raise fees and charges.
 
BUSINESS TAXES: There was no change to Ireland's relatively low 12.5 percent corporation tax -- the subject of opposition in some capitals in Europe -- and Lenihan said Ireland would defend the rate against all comers. He also maintained the three-year corporation tax exemption for start-up companies. Lenihan extended a car scrappage scheme -- introduced last year and responsible for increased vehicle purchases this year -- until the end June 30, 2011

PROPERTY TAXES: Lenihan said he wanted to bring confidence to Ireland's battered housing market and will amend how stamp duty is charged by bringing in a new flat rate of 1 percent tax on all residential property transactions up to a value of 1 million euros and 2 percent to amounts above 1 million.

EXPENDITURE
 
The budget provides for day-to-day government spending savings totalling 2.2 billion euros -- the majority of which will be sought through social welfare and health cuts -- with the other 1.8 billion in expenditure savings achieved through reductions in capital spending.

MINISTERIAL PAY: Lenihan stood by a deal agreed with unions not to cut public sector pay but said the Prime Minister's salary would be cut by a further 14,000 euros with ministerial pay shaved by another 10,000 euros. Lenihan also said he wants to bring in a salary cap of 250,000 euros in the public sector.

SOCIAL WELFARE: The government will seek to save 873 million euros in the social protection budget, with almost half of those savings derived from a 4 percent reduction in basic unemployment benefit and the same cut to public sector pensions. The state pension remained the same while reductions of child benefit will yield 149 million euros.

HEALTHCARE: The health and childcare budget is to be cut by 746 million with the brunt of savings sought in drug costs, professional fee payments and payroll saving from voluntary redundancies.

EDUCATION: Savings in other areas next year will be in double digit million figures with the exception of 170 million euros to be taken out of the education budget achieved through reductions in student support schemes, capitation grant and a hike in the cost of attending university.

 

Date created : 2010-12-07

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