The generous Mr Cowen

Wednesday was Budget day, the day when Minister for Finance Brian Cowen announces details of Government spending for 2007, and how that spending is going to be funded by way of taxes. This was Mr Cowen's third Budget, the last before the General Election and it was widely agreed that no Finance Minister ever had an easier task in balancing the nation's books. The tax revenue, which has been flowing into the Exchequer at unprecedented rates in recent months, is far in excess of last year's Budget forecast. Economists noted that the €10bn collected in November was more than that collected in the full year in 1990. This situation allowed Mr Cowen to be generous. Pensioners and social welfare recipients fared particularly well, while the burden on income tax payers was eased slightly. In fact the only people who should be disappointed are smokers but of course that is not the case, as many others did not have their high expectations fully met. The effect of the Budget will be to increase Government spending by 11.5% while maintaining a projected general Government surplus of 1.2%.
INCOME TAX: The top rate has been reduced from 42% to 41%; Personal Credits have increased by €130 to €1,760 for a single person; and the standard rate band (20%) has increased from €32k to €34k. The effect of all this is that only one taxpayer in five is now paying tax at the top rate and the person on the legal minimum wage does not pay any tax.
EXCISE DUTIES: 50c has been added to the price of a packet of cigarettes; the duty on home heating oil (€16 per 1,000 litres) has been abolished; there is no change in the duties on road fuel or alcohol.
PENSIONS: The contributory old-age pension increases from €193.30 to €209.30 per week while the non-contributory (means tested) pension goes up from €182 to €200 per week.
SOCIAL WELFARE: Rates increase by €20 a week, with the minimum rising to €185.80.
CHILD BENEFIT: An additional €10 per month per month will be paid in respect of each child. This brings the rate to €160 per month for each of the first two children and €195 for each subsequent child.
HOUSE PURCHASE: The Minister decided not to make any change in Stamp Duty, believing that what he would give back would go into the pockets of property developers and house sellers rather than first-time buyers. Instead he doubled the ceiling for mortgage interest relief for first-time buyers, from €4,000/€8,000 (single/married) to €8,000/€16,000 (single/married). This will be available for the first seven years of a mortgage. While a cut in Stamp Duty would only have affected those buying a house from this point on, the tax relief benefits some 25,000 people who purchased their first home within the past seven years.
TOURISM: Hotel owners had been claiming they were at a disadvantage in attracting major conferences to this country and the Minister responded by allowing VAT refunds on hotel costs for conference visitors.
ENVIRONMENT: Farmers are being offered generous grants to change over to crops that can be used to create Biomass fuels; consultations are to take place to see how best to tax cars so as to penalise those drivers who opt for vehicles seen as more harmful to the environment. It is expected that in next year's Budget changes will be made to base Vehicle Registration Tax on the polluting effects of a vehicle's engine.
SMALL BUSINESS: Tax breaks under the Business Expansion Scheme (BES) and Seed Capital Scheme (SCS) have been enhanced and extended. There has also been some easing in the regulatory requirements; the threshold for registering for VAT has increased while smaller companies that are registered will make returns less frequently.
CHILD CARE: In previous years the costs paid by working parents for child care has been a major talking point prior to the Budget. This year it was hardly mentioned and Mr Cowen responded accordingly. The one thing he did do was to increase the tax exemption for a childminder looking after up to three children, from €10k to €15k.
MATERNITY LEAVE: Paid maternity leave increases from 22 to 26 weeks while a new mother can then take a further 16 weeks unpaid leave and retain job security.
HEALTH: Private patients using beds in public hospitals will pay an extra 25% for the privilege, a fact that sooner rather than later will be reflected in health insurance costs. The estimated €50m raised through this measure will be used for the care of the elderly, both in their own homes and in nursing homes. Additional funds for this purpose will also be raised through an increase in the health levy; an additional 0.5% will be deducted from earnings in excess of €100k per year.
Full budget details can be read at: http://www.budget.gov.ie/2007/budgetinfo.html