Blow for millions of Irish workers after tax break decision as coalition blasted over new €100bn splurge details blunder
The
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Finance Minister Paschal Donohoe has a €1.5billion tax package to play with
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Minister Jack Chambers issued a warning about the impact of tariffs
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Coalition leaders announced a €100billion building plan for the future of the country
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The Summer Economic Statement fires the starting gun on
Ireland pulled in bumper
On the back of this, the Government is planning to spend €116billion in next year's Budget – an increase of €9.4billion on last year that the coalition leaders will now chop up on new measures.
Finance Minister
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Just last month, the Government committed to slashing the VAT rate for restaurants and cafes from 13.5 per cent to nine per cent – a move that will cost €1billion.
This will leave just €500million for other tax cuts including the rent tax credit, the help to buy scheme and income tax changes.
And that's before the impact of Donald Trump's tariffs are baked into the Budget, with the Finance Minister warning that they will have to cut back their Budget plans if a
In last year's Budget before the general election, the Coalition spent more than €1.5billion slashing income taxes and the USC which boosted the average worker by around €1,000.
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Most read in the Irish Sun
With the Government committed to cutting the VAT rate for the hospitality sector at a cost of €1billion – it looks like workers will be left with little to no boost in their pay packet in the upcoming Budget despite the ongoing
Challenged on this at today's announcement, Minister Donohoe told the Irish Sun: "It would not be right to grow the scale of our tax package with everything that we are confronting at the moment."
Finance Minister Paschal Donohoe breaks down Trump tariff impacts on Irish
He said the Irish economy generates between €1.3 and €1.5billion each year through income growth.
Minister Donohoe added: 'If we were to have a bigger tax package than that, I don't think it would be the right thing to do given all we are confronting.
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'But the exact component of what the tax package and the other tax measures that will be in it, I can't answer that question until Budget day.'
The Irish Sun pointed out that the Government is willing to commit to VAT cuts for hospitality businesses before the Budget but will not discuss whether workers will be given a break.
TRADE-OFFS
Minister Donohoe replied: 'I'm answering directly the question regarding what are the trade-offs in relation to this.
'It is really important to be open about what the trade-offs are.
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'If you were to bring forward a tax package that was to fund a full year measure in relation to VAT the cost of that would be around €1billion and then if I was to add to that other measures that we have done in the past, we would have a tax package that is far bigger than I believe would be safe.'
Instead of breaks for workers, the upcoming Budget will focus on three main areas – increase investment in Ireland, improve public services and build up the country's financial resources to guard against future shocks.
SPENDING COULD BE CUT BACK
Today's Budget spending plan was based on a situation where there are no trade tariffs between the US and the EU.
However, with 10 per cent tariffs currently in place and US President Donald Trump threatening to hike that up to 30 per cent – it looks like the Budget spending will have to be cut back before the announcement that is due in October.
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Public Expenditure Minister Jack Chambers issued a grim warning about the impact of tariffs with one third of the country's income coming from corporation taxes - €15billion of which could be wiped away.
'If we were to have a bigger tax package than that, I don't think it would be the right thing to do given all we are confronting."
Paschal Donohoe
He said: 'If there is a serious economic deterioration we absolutely will have to revisit what we're setting out today to be responsible and that is in the context of the changing global position.
BUDGET WARNING
'So this is very much caveated by what could happen in the coming weeks and we won't make decisions that aren't sustainable or affordable for the Irish economy – that is absolutely clear.'
The Budget warning came on the same day that the Coalition leaders revealed their plans to spend €100billion on building projects over the next five years – but wouldn't reveal what projects.
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The Government parties have spent weeks negotiating a review of the National Development Plan which sets out what will be spent on building roads, hospitals, public transport, housing and energy infrastructure over the next five years.
This includes how the Government will spend the €14billion Apple tax windfall and the billions made from the sale of the State's shares in AIB.
FEW DETAILS
The last NDP included a list of projects that were being funded across the country with specific details on how much each road, hospital or railway line would be allocated.
However, this time around the Government have simply allocated cash to specific departments with detailed cash commitments only given to a handful of major projects.
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'If you were to bring forward a tax package that was to fund a full year measure in relation to VAT the cost of that would be around €1billion and then if I was to add to that other measures that we have done in the past, we would have a tax package that is far bigger than I believe would be safe.'
Paschal Donohoe
For example, some €2billion is being allocated to the Dublin Metro project – a railway line that will link the city centre with the airport and has been in the planning phase for decades and has already cost €300million.
However, there were no cash promises for specific roads, hospitals or housing projects, with Coalition leaders instead claiming that these would be announced over the coming weeks by specific ministers.
'FUNDAMENTAL MESSAGE'
Taoiseach
He said: 'The last NDP was too big a document if I'm frank. The fundamental message today is the overall investment that is going to be allocated to infrastructure and housing.
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'It is quite unprecedented. Each minister will have to prioritise and they have work to do with their stakeholders and departments in terms of prioritising the allocation of their funding and prioritisation is going to be key.'
Housing received the biggest Budget boost from the €100billion NDP review with €36billion given to Minister James Browne.
DEPARTMENT ALLOCATIONS
This was followed by the Department of
Some €3.5billion will be used to boost the country's electricity grid and €12billion will be used to improve water infrastructure across the country, which will help build more homes.
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Taoiseach Martin also confessed that the Government was now scrapping the 2:1 spending rule at the Department of Transport that saw twice as much cash spent on public transport than on roads.
The rule was brought in by former Transport Minister Eamon Ryan but Martin today claimed it was 'unworkable' – despite being Taoiseach when it was introduced.
COME CLEAN PLEA
Opposition parties today blasted the Government's new National Development Plan for being scant on details as they called on the Coalition to come clean with where the cash was being spent.
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He said: 'Ministers are scant in detail but they are now going to have to explain which
Social Democrats TD Rory Hearne claimed the huge boost in funding for housing will not help solve the
He said: 'No amount of money can solve the housing crisis if the government refuses to change its approach to providing social and affordable homes - today's 46-page document gives me no reason to believe that it intends to do otherwise.
'Last month's shocking
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Workers are in line for little to no income tax breaks in the upcoming Budget
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Opposition parties blasted the National Development Plan for being scant on details
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