Budget 2016: Is there an Election coming?
Michael Noonan entered the Dáil chamber yesterday afternoon and without blinking an eye announced that he was introducing only one tax hike this year, a 50 cent increase in the price of a packet of 20 cigarettes. The rest of Budget 16 would see tax cuts, expenditure increases and jobs galore.
Minister Noonan swiftly countered his tax hike with the biggest tax cut, changes in the dreaded USC. The USC exemption threshold was increased to €13,000. He also cut the actual rates of USC from 1.5%, 3.5% and 7% to 1%, 2% and 5.5% and boasted that marginal tax rate would now fall below 50%.
An earned income tax credit of €550 was introduced for the self employed and those not already in receipt of the PAYE tax credit. A welcome boost for the self employed, but it does not hide the fact that the self employed are still €1,100 less well off than their PAYE counterpart.
The effect of the above changes means that the average worker will see their income increase by 1.2% or an additional week’s wages for every worker. Single person earning €40,000 working in the PAYE sector could expect to see an additional €413 per annum in their take home pay, while their self employed counterpart will take home €963.
A number of incentives to assist the lower paid were announced including a 50 cent per hour increase in the minimum wage to €9.15 per hour, an increase in the home carer’s tax credit to €1,000 together with an increase in the qualifying limit to €7,200. Anomalies within PRSI whereby someone on lower pay receiving a pay rise could see their tax home pay decrease are to be ironed out. Family income supplement was also broadened.
Families were offered some support with a €5 increase in the children’s allowance per month to €140 per child. The ECCE scheme for pre-school care for children is extended to those children that have reached their third birthday and can be availed of until the child reaches 5 and ½ or they attend primary school. Two weeks statutory paternity leave entitlement for fathers is to be introduced from September 2016. Free GP care is also to be extended to all children under 12.
Older people will see a €3 increase in their weekly state pension. €2.50 per week has been added to the fuel allowance and the Christmas bonus for those on social welfare has been increased to 75% of their weekly payment.
As well as the earned income tax credit, the business community saw some of their concerns addressed. The 9% VAT rate is to be maintained. The rate of CGT on disposal of businesses in whole or in part below €1m has been decreased from 33% to 20%. Commercial motor tax has been decreased across the board with the highest rate decreased from €5,195 to €900 per annum.
In the public sector, Minister Howlin committed to an orderly restore of pay levels together with 2,260 new teaching posts including 660 new resource teachers and a commitment to reduce pupil teacher ratios. 600 new trainee Gardai were also promised.
It appears that the government have attempted to appease all sectors of the economy and the social community; some cynics may say that they have attempted to appeal to as broad a range of voters for the next general election as possible. Only time will tell. For now, I’m off to enjoy my extra few Euros!!
Minister Noonan has advised that there will be no more booms and busts. Hopefully he is right; hopefully Ireland has turned a corner.
Follow the link for full details of the budget summary.