Ireland cuts tax and ups benefits

14 Dec 00
The largest tax cuts in the history of the Irish state were announced last week by finance minister Charlie McCreevy.

15 December 2000

The hand-out was made possible, McCreevy said, by the government's strong financial position. Ireland has a general government surplus of I£3.9bn (£3.15bn), 4.3% of gross domestic product; an Exchequer surplus of I£2.5bn; and a current budget surplus of I£6.1bn.

McCreevy told the Irish Parliament that since Fianna Fail formed the government in June 1997, a quarter of a million jobs had been created and unemployment had fallen from 10% to less than 4%. Spending on the health service had risen by 86% (an increase of I£2.3bn) and on education by 67% (I£1.4bn), he said.

Tax thresholds will rise by I£800 to I£5,500 for a single person and by I£1,600 to I£11,000 for a married couple. Some 668,000 workers – 38% of those in employment – will be exempt from income tax.

The threshold for paying standard-rate income tax will rise from I£17,000 to I£20,000 and the standard rate of tax will be cut from 22% to 20%. Higher-rate taxation will fall from 44% to 42%.

Child benefit will rise by more than 50% and pensions and unemployment benefit by about 10%.

The giveaways come ahead of a likely early election. But as well as being potential vote-winners, the improvements to tax and benefit levels are also part of the agreement reached last week by McCreevy with public sector unions to try to rescue the 'Programme for Peace and Prosperity' – the social partnership between state and workers.

VAT will be cut from 21% to 20% and fuel excise duty will fall by two pence a litre on unleaded petrol and by six pence a litre on sulphur-free diesel. This will increase the massive price differential on fuel between the Irish Republic and Northern Ireland.

The costs of the budget will partially be met by raising employers' social insurance payments through the removal of contributions ceilings for the self-employed and proprietary directors.


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