Irish Finance Minister Brian Lenihan said most of the tax increases the government envisages as part of a four-year plan to reduce the budget deficit will be implemented this year.
This “is an important element of the National Recovery Plan, which plots a course to sustainable economic growth,” Lenihan said in a statement as he published the Finance Bill in Dublin today, which gives effect to the tax changes. “Most of the income tax changes envisaged in the plan were made in Budget 2011.”
The budget is part of a government plan to lower the deficit to the European Union limit of 3 percent of gross domestic product in 2014. It contained 6 billion euros ($8.2 billion) of tax increases and savings, and the government is seeking to push through the bill before an election set for March 11.
Prime Minister Brian Cowen said yesterday there is “nothing more important” than passing the Finance Bill, as his coalition partners in the Green Party thwarted a cabinet reshuffle and forced him to set an election date.
Ireland is under pressure to push through the budgetary measures after it accepted an 85 billion-euro aid package from the EU and International Monetary Fund on Nov. 28 to help fund bank-recapitalization costs. Lenihan said “work is ongoing” on the taxation of bank bonuses, which “will be considered” as the bill goes through parliament “in the coming weeks.”
The bill includes a 10 percent reduction in employees’ tax credits, which was announced in the budget.
The government has the support of 82 lawmakers, including independents, in the parliament, compared with 80 for the opposition.
“There is a possibility -- we don’t think it is likely -- that the Finance Bill does not pass before the general election,” Brian Devine, chief economist at NCB Stockbrokers Ltd. in Dublin, said in a note to clients today. “Clearly, the EU would not be too impressed if this were to occur, but Ireland would be able to survive a couple of months before having to draw down further bailout funds.”
The scrapping of certain property-related tax breaks won’t take place in the current tax year, the Finance Ministry said today. It has postponed their abolishment until the completion of a review because of concerns of “the potential effects of the changes on the real economy, and on employment.”
-- Editors: Fergal O’Brien, Simone Meier
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