MORE BUDGET 2012 SPECULATION
The Sunday Independent speculates this weekend on the likely taxes Government will introduce or tweak in the forthcoming Budget 2012 and it doesn’t make for pretty reading. Plastic bags, medical costs, cars and children are all likely revenue-raisers.
The newspaper points out in three months’ time, the vast majority of households will have to pay around €100 to cover the so-called new household services charge – a forerunner to the much-vaunted and likely much more expensive comprehensive property tax to come. Along with this, we can expect plenty of other additional charges, including increases in carbon, capital gains and inheritance taxes to name but a few.
The newspaper speculates an increase in the health insurance levy is imminent. It is probably correct: after all, who needs taxes when you can introduce more politically palatable ‘temporary’ levies? When first introduced three years ago, the ‘temporary’ annual levy on those who paid private health insurance was €160 for adults and €53 for children. In the interim, it has risen to €205 for adults and €66 for children.
“This levy expires at the end of the year, so the Government will have to renew it — and maybe increase it at the same time,” said David Fennell, tax director with Ernst & Young.
If the levy increases at a similar rate as previously – around 13% a year – then expect to pay around €231 in 2012. The levy, which is included in your private health insurance premium, currently costs a family of two and adults and children with private insurance around €550 a year.
Government could also cut tax relief on private health insurance and on medical expenses, according to Dr John Considine, an economics lecturer at UCC. This would increase the cost of health insurance premiums by around 20% and taxpayers would no longer be able to reclaim some of the costs of certain medical expenses, such as GP visits.
The cost of visiting an A&E – currently €100 – could also rise.
And if your job entails driving, you will also likely be paying more. Car tax is firmly in Government sights as is mileage allowances, which allow people to claim back a certain amount of work-related travel expenses.
“This was one of the sneakier cuts of about two years ago, when mileage allowances were cut by about a quarter,” Fennell said. “That hit people’s pockets. For those who travel a lot for their jobs, the mileage allowance is a good contribution towards their costs. Any further cuts to it would have an impact.”
Children have always been a costly business but they are also about to get a lot more so.
“The tax expenditures for children could be hit before those for property and health,” Dr Considine suggested. “Child benefit and the one-parent family tax credit could be targeted as they’re the biggest ones when it comes to expenditure: If the Government is going to go after stuff, it will go after the big ones.”
And talking of which … Capital Gains Tax (CGT) is on the agenda in a big way. At present, you don’t pay any CGT on profits from the sale of your principal private residence but this could be about to change. This relief currently costs the state €2.4 billion a year.
One thing already assured is the reduction of mortgage interest relief. A first-time buyer can currently avail of a 20, 22.5 or 25% relief for the first seven years of a loan, depending on when the mortgage was drawn down and non-first-time buyers can get relief at 15%.
However, for anyone buying a home in 2012, interest relief will be capped at 15% for first-time buyers and 10% for others.
If you have much money left to do the grocery shopping, remember to take your plastic bags with you. Those of us who habitually forget and don’t want to bring home yet another cardboard box to avoid the current 22c bag levy, should mend our environmentally unfriendly ways. Like food prices, the levy is on the way up.
A new opinion poll shows we would prefer more spending cuts to higher taxes – now there’s a surprise!
“A new poll by Behaviour & Attitudes for the Sunday Times shows that 78% of Irish adults would prefer the government to make the bulk of its expected €4 billion adjustment by reducing spending further,” the newspaper writes. “Just 18% of those surveyed said they wanted a greater part of the budget adjustment made from tax increases instead, and 4% offered no opinion. “
The findings were less conclusive across party lines, with 29% of Labour Party supporters looking for tax increases as opposed to 11% among Fine Gael followers.
The article also points out support for Government has fallen by 8 points to 34% compared with a similar poll conducted in August.
“The findings … suggest that the government’s long post-election honeymoon is over,” the newspaper states.
On a more positive note tax-wise, ahead of the weekend think-in at Dublin Castle marketed under the somewhat grandiose title of the Global Irish Economic Forum, finance minister Michael Noonan intimated he would be considering tax cuts in the forthcoming Budget.
“There is a problem in the commercial property market in Dublin – which is controlled by Nama – and one of the difficulties seems to be due to the fact that if you sell commercial property in London you pay 1% stamp duty, which in Dublin you pay 6%,” Noonan said.
“If we were thinking of changing that, now is the time, because collection of stamp duty is so low. I am not saying we will do that, but it is something we will analyse.”