This year’s Budget brought modest increases in take-home pay and plans to eventually increase parental leave to seven weeks.
An Taoiseach Leo Varadkar, TD, prefaced last year’s Budget with the warning that it would be “no big bonanza” and not to expect “fireworks”. For the most part, Budget 2019 has shaped up as equally lacklustre.
The Government has a total ‘fiscal space’ (in other words, available spending money) of €800m. It is committed to allocating this money on a two-to-one basis in favour of spending over tax cuts.
Today (9 October), Minister for Finance, Public Expenditure and Reform Pascal Donohoe, TD, stood in the Dáil to reveal the changes coming down the line. So, how did the average employee fare?
Slightly widened tax bands
Similar to last year, this Government widened tax bands and provided mild relief to earners in Budget 2019. The entry point to the higher rate of income tax for all earners will be raised by €750, increasing from €34,550 to €35,300 in the case of a single worker.
The Universal Social Charge (USC) rate for those on incomes between €19,300 and €70,000 is set to be reduced from 4.75pc to 4.5pc. There will be a €502 increase in the middle USC entry point, raising from €19,372 to €19,874. This will ensure that the salary of a full-time worker on the minimum wage will remain outside the top rates of USC. Finally, the weekly threshold for the higher rate of employers’ PRSI will be increased from €376 to €386.
Self-employed workers, of which there are 150,000 in Ireland, will see Earned Income Credit increase by a further €200, now totalling €1,350.
A ‘caring’ Budget 2019 for parents
Donohoe concluded his address to the Dáil by branding Budget 2019 a “caring” Budget. Whatever your opinions on the veracity of that statement, there were certainly some new provisions made for working parents of Ireland. Donohoe promised that it would “benefit families by looking to make childcare more affordable”.
The Government has announced a new Parental Benefit to be given alongside current maternity and paternity benefits. Donohoe revealed the new scheme tipped for roll-out in November 2019 that will give parents an extra two weeks’ paid parental leave. The Minister has indicated that he intends to increase this to seven weeks.
Income thresholds for the Affordable Childcare Scheme are also set to increase next year. The base income threshold will be raised from €22,700 to €26,000. The maximum income threshold will rise from €47,500 to €60,000.
Your after-work night out may break the bank
The price of alcohol has, rather unexpectedly, emerged from Budget 2019 unscathed; there was no increase to the excise duty. There was, however, a 50c hike in the cost of a pack of 20 cigarettes and a pro rata increase on other tobacco products.
The controversial 9pc special VAT rate for the tourism industry was increased in this year’s Budget despite the pleas of restaurateurs and hoteliers alike. The special rate was granted in 2011 to help the hospitality sector, which was particularly badly impacted by the economic crash. Now, these businesses will be charged 13.5pc VAT from January 2019. This measure will drum up a total of €466m in funding for the Irish Government, which Donohoe said would enable it “to achieve a number of priorities”.
It is likely that this increased tax, which will impact bars, cafés and restaurants alike, will hit consumers in the form of price increases. Your morning coffee, lunchtime salad box and post-payday night out may be set to get more expensive.
Putting the brakes on carbon tax
The Government did a surprising U-turn on the proposed increase to carbon tax that Varadkar flagged during the summer. This means that there will be no change to the cost of fuel and diesel, and therefore no material change to the cost of a worker’s commute from that perspective.
Many climate activists argue that scrapping the increase is irresponsible given that a recent UN climate report paints a grim picture of the Earth’s short-term prognosis. Ireland has been recently ranking as one of the worst performers in the EU for climate change action.
— Irish Times Opinion (@IrishTimesOpEd) October 9, 2018
“The decision not to increase the carbon tax is disappointing, given Ireland’s failure to meet its ongoing greenhouse gas reduction targets,” commented Annette Hughes, economist and director at EY-DKM Advisory Services, “and more particularly in the context of Monday’s report from the IPCC, which sets out in the starkest terms yet the global consequences of failure to tackle climate change.”
However, EY tax partner Breen Cassidy warns that some form of emission-related tax will likely be implemented soon. “The Government has committed to reduce greenhouse gas emissions by 20pc by 2020, and significant changes are required if this target is to be met. As a result, even if there is potentially no increase in the carbon tax today, given the prevalence of the climate change agenda, there may be alternative taxation charges in the future.”
Donohoe outlined various climate-related measures across various departments in 2019. The change that will likely be most relevant to the average office workers will be the extension of Vehicle Registration Tax (VRT) relief for hybrid vehicles until the end of 2019. A 1pc VRT surcharge is also being brought in for diesel engineering passenger vehicles from 1 January 2019.