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Govt to slash public spending, lower tax bands in December budget

The Government has revealed some of the hard-hitting measures it will take in the December Budget and it makes tough reading for some.

Minister for Public Expenditure Brendan Howlin's comprehensive review on expenditure will be key to what decisions the Department of Finance's make ahead of Budget 2012
Minister for Public Expenditure Brendan Howlin's comprehensive review on expenditure will be key to what decisions the Department of Finance's make ahead of Budget 2012
Image: Leon Farrell/ Photocall Ireland

THE IRISH GOVERNMENT has agreed to introduce some tough tax measures and public spending cuts as part of its deal with the European Union and International Monetary Fund.

The Department of Finance revealed some of these measures in a document – a Memorandum of Understanding (MoU) with the so-called Troika – posted to its website yesterday evening.

The Government hopes to bring in an extra €1.5bn in revenue by lowering personal income tax bands and credits, reducing private pension tax reliefs and cutting back on general tax expenditure.

The Department of Finance said it is also planning a full-on property tax and an increase in the carbon tax in order to come up with the €1.5bn.

Reforms of capital gains tax and acquisitions tax will also be introduced.

On top of tax measures to bring in more income, the Government plans to slash public spending.

Finance Minister Michael Noonan has told the international partners that Ireland will cut its public expenditure by €2.1bn in the upcoming budget. The reductions will be made across social expenditure, as well as capital expenditure, according to the MoU.

There will also be a reduction in the number of public servants and adjustments to the public service pension.

All the budgetary measures outlined in the MoU will be looked at by the Government again once Minister Brendan Howlin’s Comprehensive Review of Expenditure (CRE) is completed. The four year Programme for Government will also be considered when examining the budget.

A new four year plan for public finances will be drawn up ahead of the budget in December.

More: Ireland ‘may exceed’ EU’s target for cutting budget deficit >

Read: Central Bank scales down expectations for economic growth >

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