From reading the Tax Strategy Group papers, we can only conclude that the senior civil servants who drew them up, led by the Department of Finance, really did not want to give their political masters any ideas that would involve spending more money or cutting taxes in the budget.
Having already seen quite a few budget kites flown, encouraged by the talk of the billions in budget surpluses, the last thing the mandarins wanted to do was give anyone any ideas for ones they had not thought of already.
This does not mean there will be nothing nice in the budget – just that civil servants are nervous about the longer term implications for the public finances and the risks of overheating the economy.
So the only area examined in detail in the income tax paper was the idea of a refundable tax credit, which would mean that those on lower earnings would benefit from the full value of credits provided against income tax. To say the write-up of this option, supported by the Green Party, was not very enthusiastic, would be an understatement.
When the papers start with “this idea has some merit”, you know that all the disadvantages will soon follow. Meanwhile, there was no talk of how much income tax credits and bands should be increased – though this will certainly happen. Nor of Leo Varadkar’s ideas of a new middle 30 per cent tax rate, which won’t.
Elsewhere the civil servants dredged up the well-worn idea of increasing PRSI on the self-employed and of a higher PRSI burden on business, through abolishing the lower rate.
The old chestnut of equalising the tax burden on diesel and petrol was also rolled out – maybe one year it will happen. And the civil servants tied themselves in knots trying to kill off the idea of cutting the VAT rate on new house building from 13.5 per cent to 9 per cent for a temporary period, arguing that builders might not cut prices when the rate was cut, but would surely hike them when it was reversed back up again. In the Department of Finance the glass is always half empty.
And they will be on guard against attempts by the hotel and restaurant lobby to rescue their 9 per cent rate too, ahead of its planned abolition at the end of August.
