THE GOVERNMENT has been taken aback by proposals from the International Monetary Fund (IMF) to implement a range of tax increases and spending cuts which go well beyond what it had planned for the budget in December.
The IMF has suggested a property tax at least double that under consideration by Ministers along with cuts to pensions and means-testing of universal payments like child benefit which have been fiercely resisted by Minister for Social Protection Joan Burton.
Minister for Finance Michael Noonan last night rejected the IMF proposal for a property tax of 0.5 per cent of market value which he said would average €625 across the country.
Speaking in Westport he said such a property tax rate was too high and would place an onerous burden on Irish households. Mr Noonan said the property tax planned by the Government would be lower but refused to divulge by how much.
There has been speculation that the Government was working on the basis that the average property tax will be about €300 a year but Mr Noonan said the exact amount of the tax would be released only on the day of the budget on December 5th.
He was speaking to reporters during Fine Gael’s two-day parliamentary party meeting in Co Mayo.
“On the IMF advice that should be 0.5 per cent of the value, which would bring in about €1 billion, I would not propose to the Government at that level. I think it’s too high.”
The Minster is understood to have told colleagues that the Government was thinking of a figure about half of that proposed by the IMF. Mr Noonan confirmed that the tax, which will be collected by the Revenue Commissioners, will be payable from July 1st next year and he insisted it would be collected from all sectors of society.
It is understood that PAYE workers will be given the option of having the tax deducted at source but Mr Noonan said people in receipt of payments from the State like direct farm subsidies would have the tax deducted if they did not pay up.
On the spending side the IMF advised the Government to focus social supports on those who need them and to reform the health and education sectors to get better value.
The report said keeping expensive universal supports and subsidies like child benefits and pensions at current rates was “difficult to justify under present budgetary circumstances”. It said improved targeting of spending on child benefit, the medical card and college fees “could generate significant immediate savings and contain demographic related spending pressures over the longer term, while effectively protecting the poor”.
On the Croke Park agreement the IMF said the agreement had brought industrial peace but that the public sector pay bill remained high.
It pointed out that Ireland was spending “significantly more” than the OECD average on health and education but that performance in the sector remained only about the OECD average.
In the health sector, the IMF said potential reforms could include new working models to minimise premium and overtime payments, greater use of primary care rather than hospital stays, and substantially increasing the low share of generic drug use.
It said revised funding for higher education could deliver broad access without more public investment by taking into account skills priorities in course availability and linking college fees “to the costs and earnings potential of courses while supporting low-income students through affordable loans and grants”.
Meanwhile there was further confirmation that the deal on Irish bank debt expected next month is likely to be delayed. An EU official said it would take time for technical discussions to be translated into political reality. He suggested, however, that “a better result” might be expected after two or three more weeks of talks instead of a “not-so-good result” otherwise.
