The Cabinet will meet again tomorrow to finalise a budget package involving deep cuts in Health and Social Welfare and a substantial property tax.
It will be the third time this week Ministers will have met to discuss the budget which is due to be unveiled on Wednesday.
Government sources indicated last night the much anticipated property tax will be levied at the rate of 0.2 per cent of market value. This means that a property tax of €500 will be levied on a house worth €250,000 with €1,000 falling due on properties worth €500,000.
It is estimated that 90 per cent of homes are valued at under €300,000, with the average house price coming in at €157,500. The property tax on that average house will amount to €315 a year. The tax will be collected by the Revenue Commissioners and householders are expected to have the option of having it deducted from pay packets. People who paid large stamp duty bills in recent years may be exempted from the tax for a period and special arrangements are likely to be available for those in negative equity.
The details of any exemptions will not become clear until Minister for Finance Michael Noonan announces the budget taxation package next week.
The Minister is coming under pressure from colleagues to make a symbolic raid on the very large pensions being paid out to a small number of people who retired at the height of the boom. Mr Noonan is understood to have told colleagues there are legal difficulties about singling out any particular group of people but he has been urged to apply an across-the-board surtax on those with pensions of over €100,000 whether they are in the public or private sectors. Plans to reduce tax relief to the standard rate on ordinary pension contributions are expected to be shelved. Instead the cap on the tax relief available to people making pension contributions is expected to be lowered. While income tax rates will not be touched, a hike in indirect taxes is likely. The excise on alcohol and tobacco is set to increase, with wine likely to take a bigger hit than beer.
In terms of spending cuts, the Cabinet is close to final decisions on the detail of the €800 million reduction in the health budget and the €540 million cut in social welfare provision.
A cut of €10 in child benefit is expected to yield €138 million in savings in a full year and is likely to be the biggest single cut in Social Protection.
A new format for the presentation of next Wednesday’s budget will see Mr Noonan introducing the main taxation measures in a 40-minute speech. He will be followed immediately by Mr Howlin.
