By Nick Mann | 6 December 2012
The Irish government has announced a €3.5bn package of spending cuts and tax increases in its 2013 Budget, aimed at meeting deficit reduction targets set as a condition of its bailout.
Among a range of measures expected to raise €1.25bn is a new annual property tax, which comes into effect in July next year. It will be levied at 0.18% of the market value of properties worth up to €1m and 0.25% for those above. New and unoccupied homes will be exempt until 2016 and first-time buyers until 2014.
Outlining the Budget plans yesterday, finance minister Michael Noonan said the levy, which is expected to raise €250m in its first six months, was ‘a better alternative to increased taxes on income’.
He added: ‘Property taxes are used across the world as they are better for the protection and creation of jobs than taxes that increase the cost of employment.’
Increases on alcohol excise duties and motor tax will together raise €280m next year, while changes to Pay Related Social Insurance are expected to raise over €300m.
Among the €2.25bn spending cuts, a €10-a-month reduction in child benefit is expected to save €136m and measures to contain the costs of reimbursing providers of free health care will save €323m. These changes to the the Primary Care Reimbursement Service include increasing prescription costs and reducing professional fees for health service providers.
Noonan said that, together, the Budget measures would enable Ireland to reduce its deficit from 8.2% of gross domestic product forecast this year to 7.5% in 2012. Ireland is now expected to cut its deficit to 2.9% in 2015, he added. These goals are in line with those expected by the European Union’s excessive deficit procedure that Ireland must comply with as a condition of its EU-International Monetary Fund bailout.
The deficit projections are based on the country’s economy growing by 1.5% next year, by 2.5% in 2014 and by 2.9% in 2015.
The finance minister explained that making Ireland’s public finances sustainable was crucial to ensuring it was able to re-access the global markets to raise finance in the future.
‘Continuing to borrow large amounts to fund our day-to-day services is simply not sustainable,’ he said. ’The reality is that stable public finances are an essential prerequisite to long-term economic growth and job creation. We will only be able to successfully access the markets in the long term if the markets believe we have a credible fiscal strategy and agree that our debt is sustainable.’
