BUDGET DAY IS just over a week away, and the kites are already flying.
Finance Minister Paschal Donohoe indicated this week that the government is expecting to see a “very strong rebound” in the Irish economy.
But he also said he would not use the better-than-expected growth to further increase the amount of money available for spending hikes and tax cuts in Budget 2022.
The €4.7 billion package is still being finalised – with budget haggling between the Department of Finance and other departments expected to go down to the wire next week.
Not everyone will get the chunk they want from the €1 billion available for new spending, some of which has already been earmarked. There is around €500 million available for new tax cuts – or ‘tax measures’ as the government would seem to prefer us to call them, as they’ll mainly be used to offset inflation against people’s incomes.
So what can we expect to see and what are the non-runners?
Income tax
At the weekly Fine Gael parliamentary party meeting this week Tánaiste Leo Varadkar gave some details to his members about what to might expect on the tax side.
But the truth is, there will be minimal changes to income tax in Budget 2022.
Varadkar said there is a need to protect middle income earners from inflation and the rising cost of living, as inflation expected to peak above 4% in the final quarter of the year, before falling back below 2% in the third quarter of 2022.
The Tánaiste said that indexing tax credits and tax bands will instead help workers.
The programme for government states that from Budget 2022 onwards, as incomes begin to rise, credits and bands should be index linked to earnings.
The government says this needs to be done to “prevent an increase in the real burden of income tax, to prevent more low income workers being taken into the tax net because of no changes to the tax system and to ensure there is no increase in the number of people having to pay higher income tax and USC rates”.
Booze and Cigs
Due to the immense difficulties experienced by the pub and restaurant trade over the last year, it is not expected that the price of alcohol will rise this year.
Typically, the price of cigarettes has risen year-on-year, and this could be the case again.
Social welfare
Social Protection Minister Heather Humphreys said she will focus on the vulnerable, and hopes to improve the situation for those reliant on social welfare payments in this year’s Budget.
There have been indications that there could be an increase in Jobseekers Allowance, given the rise in the cost of living, and also due to the tapering off of the Pandemic Unemployment Payment (PUP) which was paid at a higher rate than Jobseekers over the last year.
Varadkar told the Dáil this week that an increase to the current minimum wage is needed as the cost of living rises.
It is currently €10.20 but there is no indication as to what it might rise to.
Pension
There has been no pension increase in the last two years.
Again due to the rise in the cost of living it is expected it will rise by at least €5, though there have been calls for it to increase by €10-€15, which would be an unprecedented move.
Fuel Allowance
There has been lots of talk about energy costs recently. The government aims to tackle the problem in the budget by increasing the fuel allowance.
The Taoiseach confirmed that “in the forthcoming budget we will seek to protect the lowest income groups and those most impacted by increasing fuel prices – so that will be an objective of ours.
“We are conscious of, on the welfare side, the fuel allowance and the whole area around energy costs rising across Europe.”
Remote working
Varadkar has said that within the €500 million tax package, there will be measures to promote remote working.
“What we’d like to do is to have a system whereby if someone is working from home and they incur costs, particularly utility costs, they’d be able to defray that in some way against the tax they pay. That exists already but it hasn’t been updated in many years,” he said.
Christmas Bonus
The government would be foolish to pull back on the Christmas bonus when they have paid it out consecutively over the last number of years.
The Christmas Bonus payment (an extra week’s payment) is normally made to people who are in receipt of long-term social welfare payments and who are entitled to a normal payment in respect of the week that the bonus is paid.
People who are unemployed for less than 12 months do not normally receive this payment. As an exceptional measure last year due to the pandemic, the bonus payment was made to people in receipt of PUP or a jobseeker’s payment for at least 4 months (17 weeks).
One to watch this year.
Help to Buy Scheme
Housing is the biggest issue for this government, so expect to hear lots of talk about the government’s Housing for All plan and how much money they are going to be spending on it this year.
One aspect of it that we know will be included in the Budget is the Help-to-Buy Scheme. Housing Minister Darragh O’Brien previously told The Journal that he wanted to see the scheme extended into next year. It is due to expire at the end of December.
Under the scheme, first-time home buyers are able to apply for a grant of up to €30,000.
The Tánaiste confirmed this week that it will be extended into next year. It’s not believed that the cap of €30,000 will be raised.
Tourism voucher
Remember the Stay and Spend Scheme? Well, a new voucher scheme – one that is hopefully less cumbersome – could be announced on Budget Day in a bid to boost domestic tourism in the off-peak season.
Pandemic bonus
Taoiseach Micheal Martin has confirmed that the expected pandemic bonus for frontline workers will not be announced on Budget Day, telling reporters it is “not a Budget Day issue”.
Due to the ongoing debate about the bonus and who should get it, the government is adamant it does not want that narrative overtaking other announcements made on Budget Day, and therefore the details are likely to emerge shortly after 12 October.
A tax-free voucher of up to €500 and an extra bank holiday are amongst measures under consideration.
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