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Feb, 2011

Promises, promises … is there no end to them as the February 25 election day draws nearer? At least the electorate is beginning to get a clearer idea of what to expect on the tax front when the new government takes power. And, increasingly, it is looking like Fine Gael’s pronouncements on just about everything are the ones to watch.

In The Sunday Times, economics columnist Damien Kiberd takes a tour around the various taxation proposals from all of the major political parties. They have one thing in common: regardless of right or left, they don’t make for pretty reading.

“Labour and Fine Gael’s ‘soak the rich’ instincts must be sated by a 30% minimum effective tax burden on the wealthy, regardless of the allowances claimed,” he writes. “But who is ‘wealthy’? Fine Gael defines these people as ‘millionaires’ but Labour thinks it should mean anyone earning more than €250,000 a year.”

Kiberd then goes on to question Fine Gael’s pledge of no more income taxes under its watch, wondering if it is a promise it simply will not be able to keep.

“Is it possible to make such a commitment given the memorandum between the EU, the European Central Bank and the IMF and the outgoing government,” he asks. “The document agreed last November states that income taxes must rise by €1.5 billion in 2012, after big increases this year. Michael Noonan, Fine Gael’s finance spokesman, is having a good election, but he needs to explain.”

Fine Gael has also ruled out a property tax on primary private residences, despite the expectations of our international financiers that one would be introduced. However, those with second homes could expect to pay €300 a year under Fine Gael and €500 under Labour (would a coalition of the two settle for something in between?).

Labour also wants to increase the Universal Social Charge (usc) from 7% to 10% for all income over €100,000 – at the moment this burden falls on the self-employed for some reason. Fine Gael is keeping silent on the USC – a wise move considering the furore it continues to create.

For the record, The Sunday Times also reports on Fine Gael’s plans to introduce a mini-budget before the summer recess to cut the lower Vat rate by 1.5% and reduce PRSI for lower-paid workers.

Under a Fine Gael government, there would be a cut in the 13.5% Vat rate on labour-intensive services to 12% for two years. The party is also planning to halve the 8.5% rate of employers’ PRSI for staff earning up to €356 a week.

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