Budget to be tougher!

highgiant1985

"

Finance Minister Brian Lenihan has signalled an even more severe Budget than previously planned - saying the €3bn minimum cuts target will have to be increased.

Read more: http://breakingnews.ie/ireland/lenihan-budget-will-be-even-more-severe-475761.html#ixzz110SncBCA

Talk about a great news day. For anyone who say this already/read it elsewhere did he mention how much of an increase the new target would be? There is no mention in the breaking news link about what the new target is just that it should be more.

At a minimum IMO I think this will mean hes now going to have to make tax rate increases likely from 20% to 21% at the lower end with more people being brought into the tax band. While at the higher end from 41% to 42%.

By doing this they have to cut social welfare as well otherwise it would be more attractive to stay on the dole than work for a lot of low earners (which some people already think it is).

Permabear

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donegalfella

donegalfella wrote: »

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they will have to hit the public service, a good few thousand in redundancies would be no harm, with revenue income down so much there must be a fair few folk picking their arses in there all day, so too with motor tax offices, they are only busy for a week of the month, why have them open for the rest of the month.

daithicarr

As mentioned in another thread the median earner just pays 4% in tax compared to the OECD average of 20% so surel there is a lot of room there?

the goverment could reverse some of the give away tax breaks which were made by what ever short sighted clowns were in power back then.

seamus

The real problem with raising tax rates to generate more government income is that deflation becomes a massive issue and it can lead to deflationary spiral.

If my tax goes up by 1%, then that's 1% that I can no longer spend on groceries and fuel. That's 1% that businesses are no longer taking in, which means a 1% drop in tax take somewhere else for the government.

Savings on the other hand, don't cost quite so much.

dan_d

To be honest, I just don't see how they are going to do this without raising taxes and hitting the public sector. I'm not sure how they'll do it exactly, but I'm guessing the Croke Park agreement isn't worth the paper it's written on right now.

I shall await with bated breath. Anyone with half a brain could tell this was inevitable however. We can't keep going the way we have been, and any effects their original cuts may have had have long been outdone by the continuing level of wastage and borrowing.

Reality bites.

Riskymove

seamus wrote: »

The real problem with raising tax rates to generate more government income is that deflation becomes a massive issue and it can lead to deflationary spiral.

If my tax goes up by 1%, then that's 1% that I can no longer spend on groceries and fuel. That's 1% that businesses are no longer taking in, which means a 1% drop in tax take somewhere else for the government.

Savings on the other hand, don't cost quite so much.

actually pay cuts and lay-offs produce pretty much the same affect on consumer spending as tax increases would

seamus

Riskymove wrote: »

actually pay cuts and lay-offs produce pretty much the same affect on consumer spending as tax increases would

Correct, but the impact is massively lessened when they're confined to the public sector.

deise blue

donegalfella wrote: »

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Never going to happen , what we are going to see is tax rate increases which will hit all sectors - unpalatable I know but has the attraction of being the fairest option.

Given our extremely difficult financial situation Mr. Lenihan will explore all other options before targetting PS workers again and provoking possible industrial mayhem which could fatally undermine the future well being of the country

daithicarr

true less tax means less money being spent, but equally less money being spent by the goverment also means less money in the economy.

as this table illustrates the personal tax rates decreased along with the increase in property bubble. maybe we could do with a bit of deflationary measures?

http://ronanlyons.files.wordpress.com/2009/04/tax-rates1.png

daithicarr

pubic sector pay cuts alone wont help fill the massive deficit will it ?

seamus wrote: »

Correct, but the impact is massively lessened when they're confined to the public sector.

Riskymove

seamus wrote: »

Correct, but the impact is massively lessened when they're confined to the public sector.

but so are the benefits and the impact on closing deficit

while there are going to be a number of cuts to the PS there is simply no way Ireland can let welfare and tax system off again this year

Riskymove

daithicarr wrote: »

pubic sector pay cuts alone wont help fill the massive deficit will it ?

not really

for every € paycut that saves on the spend side there is also a loss on the income side of taxes, prsi, levy etc even before impact on consumer taxes

this will also inevitably result in private sector job losses

Manach

A 1% increase in tax, => for myself a 1% disincentive to work the extra hours need to push the product out the door for export.

daltonm

The Croke park deal was done primarily to placate the PS with the ultimate aim of placating the markets - the last thing this government wanted was a Greek like scenario.

It is dead in the water. It simply cannot be the case that the private sector and the social welfare take cuts and the PS remain untouched.

seamus

daithicarr wrote: »

as this table illustrates the personal tax rates decreased along with the increase in property bubble. maybe we could do with a bit of deflationary measures?

daithicarr wrote: »

pubic sector pay cuts alone wont help fill the massive deficit will it ?

We're in a bit of a mess at the moment.
We're already in a deflationary cycle, our government spending is massive and much of our population feel that they're on the very brink of what they can afford.

It would do us no harm to continue to deflate at a controlled pace for five years or so - or at the very least to keep inflation at a slower pace than the rest of the eurozone.

Price deflation needs to be somewhate led by the Government and not adjusted for in the budget. When you have a massive forest fire, one proven tactic is controlled burns - it keeps you one step ahead of the fire and allows you to decide where it goes rather than it leading you.

If we adjusted social welfare, public spending and income tax such that our expected inflation is x% below that of the EU at the end of 2011, then that allows us to plan for how bad it's going to be and at the same time should be a small enough adjustment that people will survive - they will control their spending and the costs of goods and services across the economy will decline in response.

We dug this hole over the course of fifteen years of runaway spending and inflation. We're not going to climb out of it in two or even three budgets. It will be a process that occurs over the lifetime of the next government, at least. We have to continue to reduce public spending, increase incomes taxes which will lead to a reduction in the cost of our goods and services, but at a slow enough rate that we don't completely screw the economy.

Riskymove

daltonm wrote: »

PS remain untouched.

remain untouced?? are you for real??:rolleyes:

daltonm

Riskymove wrote: »

remain untouced?? are you for real??:rolleyes:

Remain untouched in this budget.

Riskymove

seamus wrote: »

We have to continue to reduce public spending, increase incomes taxes which will lead to a reduction in the cost of our goods and services, but at a slow enough rate that we don't completely screw the economy.

I generally agree

a re-working of tax system is more important than simply increasing taxes imo

Riskymove

daltonm wrote: »

Remain untouched in this budget.

well firstly any tax changes apply to the PS as well as private

secondly I fully expect severe cuts to PS even if core pay is not affected

daltonm

Riskymove wrote: »

well firstly any tax changes apply to the PS as well as private

secondly I fully expect severe cuts to PS even if core pay is not affected

So why ask am I for real?


Even though the CPD said that pay would not be cut - there is an awful lot that they can touch, allowances, increments.

But, my own feeling is that it won't be enough and they will move to cut pay as well.

Riskymove

daltonm wrote: »

So why ask am I for real?

I was referring to 'remain' as if nothing had happened to date

rumour

Riskymove wrote: »

not really

for every € paycut that saves on the spend side there is also a loss on the income side of taxes, prsi, levy etc even before impact on consumer taxes

this will also inevitably result in private sector job losses

The hole we are will I think result in the following 4 year budget in November:

1. Rise in income tax..... get money..... get money
2. Rise in stealth tax......get money......get money
3. Find a means of taking money from people who saved.....get money
4. Cut public sector spending massively

This may allow us to borrow some more money on the bond markets in the new year. If any of this doesn't work the official operation of the country by our elected representatives closes down, because we can only keep the show on the road to March.
Likely outcome, budget proposals november, government falls december, election Jan-Feb new government March to late for any convincing action.
April next year in comes the ECB to re-organise our public finances and our public servants are crucified (in comparision to what they thought in the November 10 budget).

We can argue until the cows come home about how to get money into or out of the economy and whats fair and not fair. We are broke, living on patch of land in the sea, the people on this patch of land are now totally dependent on scrounging. The rest of the world is now tired of our scrounging. Our economy is headed for a massive downscaling, unfortunately for our public sector this means massive cuts. This is not my personal wish, but can anybody present a scenario where this will not happen now???

daltonm

Riskymove wrote: »

I was referring to 'remain' as if nothing had happened to date

Ah .

No - I know that the cuts have been horrific.

The_Honeybadger

daltonm wrote: »

But, my own feeling is that it won't be enough and they will move to cut pay as well.

No chance, the PS would strike en masse and tbh I wouldn't blame them. They would introduce a property tax before they cut PS pay again. The thing that is baffling me is that every move which has the potential to make substantial savings seems to be off the table, PS pay, Water rates, property tax etc. Increasing labour taxes is not the way to go as we are probably already at the point of diminishing returns, even B. Lenihan said that earlier in the year. Where are they going to find this 3bn +? Anybody depending on our Health or other key public services should start to get worried right about now me thinks.

daltonm

mickeyk wrote: »

No chance, the PS would strike en masse and tbh I wouldn't blame them. They would introduce a property tax before they cut PS pay again. The thing that is baffling me is that every move which has the potential to make substantial savings seems to be off the table, PS pay, Water rates, property tax etc. Increasing labour taxes is not the way to go as we are probably already at the point of diminishing returns, even B. Lenihan said that earlier in the year. Where are they going to find this 3bn +? Anybody depending on our Health or other key public services should start to get worried right about now me thinks.

I agree with you. But can you foresee a situation where the private sector wage is falling and the public sector isn't?

As a country we have to scale down - on every level.

snaps

This country really seems to be on its knees now. Its getting worrying. 1st time in my life i have been worried about the future.

johnboy_123

mickeyk wrote: »

No chance, the PS would strike en masse and tbh I wouldn't blame them. They would introduce a property tax before they cut PS pay again. The thing that is baffling me is that every move which has the potential to make substantial savings seems to be off the table, PS pay, Water rates, property tax etc. Increasing labour taxes is not the way to go as we are probably already at the point of diminishing returns, even B. Lenihan said that earlier in the year. Where are they going to find this 3bn +? Anybody depending on our Health or other key public services should start to get worried right about now me thinks.

Get Real mickey ...so you dont think home owners who have already paid a shed load on stamp duty wont put up a fight...I hate to be the one saying this but the croker aggrement has a caveat of if there is a situation where we are under a catastrophic failure event then the P.S can be cut well it may not be at that point yet but we are not a kick in the arse off it...I think the P.S will probably get away in this budget but watch out for 2011 P.S will be hit hardest

tunney

deise blue wrote: »

Never going to happen , what we are going to see is tax rate increases which will hit all sectors - unpalatable I know but has the attraction of being the fairest option.

Given our extremely difficult financial situation Mr. Lenihan will explore all other options before targetting PS workers again and provoking possible industrial mayhem which could fatally undermine the future well being of the country

Fairest for whom?

The_Honeybadger

johnboy_123 wrote: »

Get Real mickey ...so you dont think home owners who have already paid a shed load on stamp duty wont put up a fight...I hate to be the one saying this but the croker aggrement has a caveat of if there is a situation where we are under a catastrophic failure event then the P.S can be cut well it may not be at that point yet but we are not a kick in the arse off it...I think the P.S will probably get away in this budget but watch out for 2011 P.S will be hit hardest

I don't need to get real Johnboy, I know they won't introduce a PT, they have even said so, my point is everywhere that there is scope to save money, or generate income seems to be off the table to please some vested interest or the other. I do agree a PT would be unfair on those who have paid stamp duty, but do remember that most houses in this country have no mortgage on them and are fully paid for, and most FTB's paid little or no stamp duty on their houses. There is the poitential to generate alot of money there even if you exclude people who have paid stamp duty in the past 10 years. If we exclude all these ways of saving or generating money all that is left is cutting services, which is the last thing that should be done, there is no easy or even correct answer, but unless B. Lenihan pulls one hell of a rabbit from his hat in December, health and other key services are going to be dramatically affected, but at least our consultants can hang onto the beemers and merc's, so it's not all bad news .

deise blue

tunney wrote: »

Fairest for whom?

Fairest in that a progressive tax system will ensure that those who earn least will pay least tax whilst those who earn more pay more tax no matter what sector they work in.

Would you agree that this is what the Government are most likely to deliver in the budget ?

johnboy_123

Well Mickey its going to be an interresting budget...I mean the tax take is coming close to the point of diminishing returns, the p.s have been promised no more cuts till 2014 so that 70% of the current expenditure off the table for cuts... So where are they going to get the money from....I never thought I would be doomsdayer but if the current gov dont get the next budget right we are all fu(ked

whatawaster

Surely no matter what we do in terms of cutting or taxing, we are going to produce the same deflationary effects. People are going to suffer losses of incomes.

So i think, as far as possible, we should do the following:

- Yearly decreases for Public Sector Pay, Social Welfare and the minimum wage until they are at acceptable levels.

- Re-working of the tax system. Make it much simpler by abolishing PRSI/Income levy and introducing one single tax, with different rates and bands. Absolutely no tax credits, and all income is taxable. So no more PRSI paid by businesses, which will encourage employment.

- Move towards lower levels of VAT. Ideally, i'd like a lower % of tax take to be from VAT, and more from Income tax.

- Cut Corporation Tax from 12.5% to 10%.



At least by going down this route, once we eventually come out the other side of this crisis, we'll have a low-cost workforce and a low cost of living.

It's going to be fairly brutal on a lot of people, but there's no way out of this without everyone taking large hits to their real income.

I think this can be done. There is huge scope for cuts in Public Wages and Social Welfare which will save billions every year.

The_Honeybadger

johnboy_123 wrote: »

Well Mickey its going to be an interresting budget...I mean the tax take is coming close to the point of diminishing returns, the p.s have been promised no more cuts till 2014 so that 70% of the current expenditure off the table for cuts... So where are they going to get the money from....I never thought I would be doomsdayer but if the current gov dont get the next budget right we are all fu(ked

That is exactly the point I was trying to make

Every sensible move seems to be off the table, if they cut the health, welfare & education budgets too much the government will fall as their spineless backbenchers and independents desert the sinking ship in order that they might retain some hope of re-election, so it really is a conundrum where to drop the axe.

daltonm

mickeyk wrote: »

I don't need to get real Johnboy, I know they won't introduce a PT, they have even said so, my point is everywhere that there is scope to save money, or generate income seems to be off the table to please some vested interest or the other. I do agree a PT would be unfair on those who have paid stamp duty, but do remember that most houses in this country have no mortgage on them and are fully paid for, and most FTB's paid little or no stamp duty on their houses. There is the poitential to generate alot of money there even if you exclude people who have paid stamp duty in the past 10 years. If we exclude all these ways of saving or generating money all that is left is cutting services, which is the last thing that should be done, there is no easy or even correct answer, but unless B. Lenihan pulls one hell of a rabbit from his hat in December, health and other key services are going to be dramatically affected, but at least our consultants can hang onto the beemers and merc's, so it's not all bad news .

He also said that the bank bailout was the cheapest in the world - it would cost 4 billion.

Everything is back on the table and it will not be pretty.

It is not about fair or who should be paid what - it is simply a matter of what this country can afford.

whatawaster

daltonm wrote: »

Everything is back on the table and it will not be pretty.

I would be amazed if they touch Social Welfare/Public Pay too much.

They'll simply lower the budgets for health/education etc and call them necessary reductions in service, which is a complete and utter lie.

seamus

mickeyk wrote: »

There is the poitential to generate alot of money there even if you exclude people who have paid stamp duty in the past 10 years.

There are roughly 1.8 million dwellings in the state. A property tax of €1,000/year would yield close to 2 billion. That will be further reduced when you take into account those in state/social housing and unsold properties belongong to developers.

You could make a significant dent in the public deficit by imposing a €5,000 property tax, but since this would represent (effectively) a 16% income tax increase across the board, it would likely result in economic collapse since most people would be unable to afford it and the state would be incapable of enforcing it.

Propery tax is not a silver bullet. It would/will be a helpful contribution, but that's about it. Compared to the monolith of public sector spending and social welfare spending, it's a drop in the ocean.

johnboy_123

seamus wrote: »

There are roughly 1.8 million dwellings in the state. A property tax of €1,000/year would yield close to 2 billion. That will be further reduced when you take into account those in state/social housing and unsold properties belongong to developers.

You could make a significant dent in the public deficit by imposing a €5,000 property tax, but since this would represent (effectively) a 16% income tax increase across the board, it would likely result in economic collapse since most people would be unable to afford it and the state would be incapable of enforcing it.

Propery tax is not a silver bullet. It would/will be a helpful contribution, but that's about it. Compared to the monolith of public sector spending and social welfare spending, it's a drop in the ocean.

Property tax is a non runner

Firstly it would be too hard to implement . ie how do you charge, location sq foot,

Secondly as someone who has a property I have already paid out about 40k in stamp duty theres your f()cking property tax...

If I hear of a property tax being imposed I will be the first to rent a truck to go for leinster house

Riskymove

johnboy_123 wrote: »

Property tax is a non runner

Firstly it would be too hard to implement . ie how do you charge, location sq foot,

Secondly as someone who has a property I have already paid out about 40k in stamp duty theres your f()cking property tax...

If I hear of a property tax being imposed I will be the first to rent a truck to go for leinster house

they are good points but on the other hand many other countries have them so it cant be impossible!!

The_Honeybadger

seamus wrote: »

There are roughly 1.8 million dwellings in the state. A property tax of €1,000/year would yield close to 2 billion. That will be further reduced when you take into account those in state/social housing and unsold properties belongong to developers.

You could make a significant dent in the public deficit by imposing a €5,000 property tax, but since this would represent (effectively) a 16% income tax increase across the board, it would likely result in economic collapse since most people would be unable to afford it and the state would be incapable of enforcing it.

Propery tax is not a silver bullet. It would/will be a helpful contribution, but that's about it. Compared to the monolith of public sector spending and social welfare spending, it's a drop in the ocean.

Never said it was the answer to all our problems, I'm merely using it as an example of the incredible way in which we have ruled out every sensible option to make or save income. On public sector spending, waste and the extorsion racket otherwise known as PS pay and pensions need to be looked at again and the CPD torn up, as well as welfare and quangos. As you say if everything is back on the table then good, because it should be. And I hope you are not trying to suggest I was advocating a 5000 euro property tax, I wasn't.

daithicarr

a property tax could not only fill some (not all or close to it) of the budget deficit encourage more energy efficent buildings and would dicourage sprawl if implemented properly.
from what i could see something around the value of 2% tax on the value of the property seems to be a international norm, i could be wrong. but that could produce a lot of extra revenue. and a lot of countrys including the USA (which have up to 5% in some state) have some form of property tax, which is far more sustainable than a tax on property transaction. maybe people who paid stamp duty over the last 10 years could pay a reduced amount until 10 -15 years has passed on the purchase of the property?

thebman

Increasing taxes and savage cuts are both on the way TBH.

We are at the point were we are eating ourselves to try to stay alive financially.

We cut pay for public sector and increase taxes hitting them both sides and hitting the private sector which is going to tank the economy further and we will end up in the same place next year with more debt interest to pay.

The goverment has to cut its subsidies to the property markets in terms of rent allowances and social housing massively in the next budget or we are doomed!

Similarly they need to dismantle and reduce the size of as many of the quangos as possible.

Realsitically at this point, it would be a miracle if we didn't need a bailout as the government have not taken the appropriate action to cut the deficeit in a sensible amount of time.

Will folk in their 60s and 70s and 80s be expected to pay this property tax, will folks already struggling to pay their mortgage have to pay it. Property tax unless it's a figure of €300 / €400 per annum for those not retired would be a looney introduction. And at that level it won't bring in huge money.

The_Honeybadger

Look no matter what cut or tax is proposed there will be somebody screaming blue murder about how unfair it is, and that they should get the money off the bankers instead. We have a structural deficit of at least 12bn that needs to be taken out of government spending, through either cuts or taxes or most likely both, we can't please everybody, Bertie tried to do that and look where we are. No matter how it is done somebody, somewhere will suffer for it, jobs will be lost and standards of living will suffer, but it has to be done. Propert tax is unavoidable, water rates are unavoidable, further cuts to ps pay and numbers are unavoidable, cuts to welfare are unavoidable, it is now about finding the least painful and damaging way of doing it.

thebman

thebman wrote: »

The goverment has to cut its subsidies to the property markets in terms of rent allowances and social housing massively in the next budget or we are doomed!

How are people on the dole then expected to have a roof over their head ?

johnboy_123

RoverJames wrote: »

Will folk in their 60s and 70s and 80s be expected to pay this property tax, will folks already struggling to pay their mortgage have to pay it. Property tax unless it's a figure of €300 / €400 per annum for those not retired would be a looney introduction. And at that level it won't bring in huge money.

As well as people who have paid umteen tousands in stamp duty

mickeyk

mickeyk wrote: »

it is now about finding the least painful and damaging way of doing it.

Any confidence that the numpties in government at the moment are capable or even inclined to do that ? Serious question by the way, I reckon they are neither capable or inclined to be honest.

The_Honeybadger

RoverJames wrote: »

Any confidence that the numpties in government at the moment are capable or even inclined to do that ? Serious question by the way, I reckon they are neither capable or inclined to be honest.

Yes I agree, they know what needs to be done but they are too afraid to upset the vested interests. A labour / FG coalition would certainly be no better, and our debt repayments are going to make life very difficult in any case. It is hard to see this ending without some sort of outside intervention.

Triangla

The public sector bill must come down, not good news for public service employees. Private sector employees are told their pay is being reduced and it's done. Not a race to the bottom, this is reality.

Main thing should be savings, job losses are never good.

Medicine is more expensive for Ireland than UK - do a deal with NHS in the North to order our meds with theirs.

Procurement is €15 billion a year - have one procurement agency for everything. Eliminate waste and get better purchasing power. Surely 10% can be shaved off this.

Overtime costs - employ/redeploy more staff in busy areas across the public sector. Much cheaper than paying multiples of basic rate and great variety and cross training for staff.

Allowances for politicians - expenses should be legitimate and vouched for, only approved hotels (cheaper ones) should be allowed for overnight stays and mileage just scrapped. Loads of people commute to work, that's their call. You make your decision when you take a job as to the pros and cons.


Pensions - Public sector pension bill needs to be reduced. The reasons why need to be explained slowly and properly and a solution phsed in over time - not just thrown at the people affected.

Looking at the private sector, unemployment is massive at the moment, not sure what can be done to get more out of this sector by way of taxes and cuts. Main thing is to get them spending and encourage growth.

Stop this stupid carbon tax and reduce or at least freeze taxes on fuel. I use petrol because I have to. I have no other choice as no consumer electric car exists for my purpose. From a green perspective we have come on leaps and bounds in the last few years. It's a recession so give us a break.

Reduce cost of rates to businesses - are these funding actual services or paying bonuses and wages?

Split up the DAA and eliminate €10 passenger tax to encourage some real competition in getting more tourists in.

moceri

How can Chief executive Officers of Semi-State bodies justify their Huge inflated salaries. Padraig McManus head of ESB, enjoyed a package of €750,000 in 2009.
Electricity in this day and age is a basic necessity. We have the highest standing charges in Europe and the most expensive Connection fees.
The ESB operates as a virtual Monopoly. What EXTRAORDINARY work does Mc Manus do to Justify his €3220 per day. This is sick and obscene in the light of 900 Homes being disconnected each month.

nadir

I reckon following on from the course of action the government is taking, this will be a very long drawn out affair, public sector wages will need to come down to lower than those of the private sector as we can't continuously borrow to foot the bill.
Reductions are inevitable, Public sector wages will fall I'm guessing by about 30%, but the length of time required for that to happen is unknown, if it's fixed for 4 years, then we can assume that they will steadily fall for the foreseeable future.
Taxes will increase to help with the deficit, and pay the bank bailout again for the foreseeable future, and more stealth taxes will be introduced.
What I'm thinking is that these austerity measures will be continuous for over 10 years, which will probably be followed by another 5 to 10 years of economic stagnation.