Budget to be tougher!

highgiant1985

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Finance Minister Brian Lenihan has signalled an even more severe Budget than previously planned - saying the €3bn minimum cuts target will have to be increased.

Read more: http://breakingnews.ie/ireland/lenihan-budget-will-be-even-more-severe-475761.html#ixzz110SncBCA

Talk about a great news day. For anyone who say this already/read it elsewhere did he mention how much of an increase the new target would be? There is no mention in the breaking news link about what the new target is just that it should be more.

At a minimum IMO I think this will mean hes now going to have to make tax rate increases likely from 20% to 21% at the lower end with more people being brought into the tax band. While at the higher end from 41% to 42%.

By doing this they have to cut social welfare as well otherwise it would be more attractive to stay on the dole than work for a lot of low earners (which some people already think it is).

Permabear

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donegalfella

donegalfella wrote: »

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they will have to hit the public service, a good few thousand in redundancies would be no harm, with revenue income down so much there must be a fair few folk picking their arses in there all day, so too with motor tax offices, they are only busy for a week of the month, why have them open for the rest of the month.

daithicarr

As mentioned in another thread the median earner just pays 4% in tax compared to the OECD average of 20% so surel there is a lot of room there?

the goverment could reverse some of the give away tax breaks which were made by what ever short sighted clowns were in power back then.

seamus

The real problem with raising tax rates to generate more government income is that deflation becomes a massive issue and it can lead to deflationary spiral.

If my tax goes up by 1%, then that's 1% that I can no longer spend on groceries and fuel. That's 1% that businesses are no longer taking in, which means a 1% drop in tax take somewhere else for the government.

Savings on the other hand, don't cost quite so much.

dan_d

To be honest, I just don't see how they are going to do this without raising taxes and hitting the public sector. I'm not sure how they'll do it exactly, but I'm guessing the Croke Park agreement isn't worth the paper it's written on right now.

I shall await with bated breath. Anyone with half a brain could tell this was inevitable however. We can't keep going the way we have been, and any effects their original cuts may have had have long been outdone by the continuing level of wastage and borrowing.

Reality bites.

Riskymove

seamus wrote: »

The real problem with raising tax rates to generate more government income is that deflation becomes a massive issue and it can lead to deflationary spiral.

If my tax goes up by 1%, then that's 1% that I can no longer spend on groceries and fuel. That's 1% that businesses are no longer taking in, which means a 1% drop in tax take somewhere else for the government.

Savings on the other hand, don't cost quite so much.

actually pay cuts and lay-offs produce pretty much the same affect on consumer spending as tax increases would

seamus

Riskymove wrote: »

actually pay cuts and lay-offs produce pretty much the same affect on consumer spending as tax increases would

Correct, but the impact is massively lessened when they're confined to the public sector.

deise blue

donegalfella wrote: »

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Never going to happen , what we are going to see is tax rate increases which will hit all sectors - unpalatable I know but has the attraction of being the fairest option.

Given our extremely difficult financial situation Mr. Lenihan will explore all other options before targetting PS workers again and provoking possible industrial mayhem which could fatally undermine the future well being of the country

daithicarr

true less tax means less money being spent, but equally less money being spent by the goverment also means less money in the economy.

as this table illustrates the personal tax rates decreased along with the increase in property bubble. maybe we could do with a bit of deflationary measures?

http://ronanlyons.files.wordpress.com/2009/04/tax-rates1.png

daithicarr

pubic sector pay cuts alone wont help fill the massive deficit will it ?

seamus wrote: »

Correct, but the impact is massively lessened when they're confined to the public sector.

Riskymove

seamus wrote: »

Correct, but the impact is massively lessened when they're confined to the public sector.

but so are the benefits and the impact on closing deficit

while there are going to be a number of cuts to the PS there is simply no way Ireland can let welfare and tax system off again this year

Riskymove

daithicarr wrote: »

pubic sector pay cuts alone wont help fill the massive deficit will it ?

not really

for every € paycut that saves on the spend side there is also a loss on the income side of taxes, prsi, levy etc even before impact on consumer taxes

this will also inevitably result in private sector job losses

Manach

A 1% increase in tax, => for myself a 1% disincentive to work the extra hours need to push the product out the door for export.

daltonm

The Croke park deal was done primarily to placate the PS with the ultimate aim of placating the markets - the last thing this government wanted was a Greek like scenario.

It is dead in the water. It simply cannot be the case that the private sector and the social welfare take cuts and the PS remain untouched.

seamus

daithicarr wrote: »

as this table illustrates the personal tax rates decreased along with the increase in property bubble. maybe we could do with a bit of deflationary measures?

daithicarr wrote: »

pubic sector pay cuts alone wont help fill the massive deficit will it ?

We're in a bit of a mess at the moment.
We're already in a deflationary cycle, our government spending is massive and much of our population feel that they're on the very brink of what they can afford.

It would do us no harm to continue to deflate at a controlled pace for five years or so - or at the very least to keep inflation at a slower pace than the rest of the eurozone.

Price deflation needs to be somewhate led by the Government and not adjusted for in the budget. When you have a massive forest fire, one proven tactic is controlled burns - it keeps you one step ahead of the fire and allows you to decide where it goes rather than it leading you.

If we adjusted social welfare, public spending and income tax such that our expected inflation is x% below that of the EU at the end of 2011, then that allows us to plan for how bad it's going to be and at the same time should be a small enough adjustment that people will survive - they will control their spending and the costs of goods and services across the economy will decline in response.

We dug this hole over the course of fifteen years of runaway spending and inflation. We're not going to climb out of it in two or even three budgets. It will be a process that occurs over the lifetime of the next government, at least. We have to continue to reduce public spending, increase incomes taxes which will lead to a reduction in the cost of our goods and services, but at a slow enough rate that we don't completely screw the economy.

Riskymove

daltonm wrote: »

PS remain untouched.

remain untouced?? are you for real??:rolleyes:

daltonm

Riskymove wrote: »

remain untouced?? are you for real??:rolleyes:

Remain untouched in this budget.

Riskymove

seamus wrote: »

We have to continue to reduce public spending, increase incomes taxes which will lead to a reduction in the cost of our goods and services, but at a slow enough rate that we don't completely screw the economy.

I generally agree

a re-working of tax system is more important than simply increasing taxes imo

Riskymove

daltonm wrote: »

Remain untouched in this budget.

well firstly any tax changes apply to the PS as well as private

secondly I fully expect severe cuts to PS even if core pay is not affected

daltonm

Riskymove wrote: »

well firstly any tax changes apply to the PS as well as private

secondly I fully expect severe cuts to PS even if core pay is not affected

So why ask am I for real?


Even though the CPD said that pay would not be cut - there is an awful lot that they can touch, allowances, increments.

But, my own feeling is that it won't be enough and they will move to cut pay as well.

Riskymove

daltonm wrote: »

So why ask am I for real?

I was referring to 'remain' as if nothing had happened to date

rumour

Riskymove wrote: »

not really

for every € paycut that saves on the spend side there is also a loss on the income side of taxes, prsi, levy etc even before impact on consumer taxes

this will also inevitably result in private sector job losses

The hole we are will I think result in the following 4 year budget in November:

1. Rise in income tax..... get money..... get money
2. Rise in stealth tax......get money......get money
3. Find a means of taking money from people who saved.....get money
4. Cut public sector spending massively

This may allow us to borrow some more money on the bond markets in the new year. If any of this doesn't work the official operation of the country by our elected representatives closes down, because we can only keep the show on the road to March.
Likely outcome, budget proposals november, government falls december, election Jan-Feb new government March to late for any convincing action.
April next year in comes the ECB to re-organise our public finances and our public servants are crucified (in comparision to what they thought in the November 10 budget).

We can argue until the cows come home about how to get money into or out of the economy and whats fair and not fair. We are broke, living on patch of land in the sea, the people on this patch of land are now totally dependent on scrounging. The rest of the world is now tired of our scrounging. Our economy is headed for a massive downscaling, unfortunately for our public sector this means massive cuts. This is not my personal wish, but can anybody present a scenario where this will not happen now???

daltonm

Riskymove wrote: »

I was referring to 'remain' as if nothing had happened to date

Ah .

No - I know that the cuts have been horrific.

The_Honeybadger

daltonm wrote: »

But, my own feeling is that it won't be enough and they will move to cut pay as well.

No chance, the PS would strike en masse and tbh I wouldn't blame them. They would introduce a property tax before they cut PS pay again. The thing that is baffling me is that every move which has the potential to make substantial savings seems to be off the table, PS pay, Water rates, property tax etc. Increasing labour taxes is not the way to go as we are probably already at the point of diminishing returns, even B. Lenihan said that earlier in the year. Where are they going to find this 3bn +? Anybody depending on our Health or other key public services should start to get worried right about now me thinks.

daltonm

mickeyk wrote: »

No chance, the PS would strike en masse and tbh I wouldn't blame them. They would introduce a property tax before they cut PS pay again. The thing that is baffling me is that every move which has the potential to make substantial savings seems to be off the table, PS pay, Water rates, property tax etc. Increasing labour taxes is not the way to go as we are probably already at the point of diminishing returns, even B. Lenihan said that earlier in the year. Where are they going to find this 3bn +? Anybody depending on our Health or other key public services should start to get worried right about now me thinks.

I agree with you. But can you foresee a situation where the private sector wage is falling and the public sector isn't?

As a country we have to scale down - on every level.

snaps

This country really seems to be on its knees now. Its getting worrying. 1st time in my life i have been worried about the future.

johnboy_123

mickeyk wrote: »

No chance, the PS would strike en masse and tbh I wouldn't blame them. They would introduce a property tax before they cut PS pay again. The thing that is baffling me is that every move which has the potential to make substantial savings seems to be off the table, PS pay, Water rates, property tax etc. Increasing labour taxes is not the way to go as we are probably already at the point of diminishing returns, even B. Lenihan said that earlier in the year. Where are they going to find this 3bn +? Anybody depending on our Health or other key public services should start to get worried right about now me thinks.

Get Real mickey ...so you dont think home owners who have already paid a shed load on stamp duty wont put up a fight...I hate to be the one saying this but the croker aggrement has a caveat of if there is a situation where we are under a catastrophic failure event then the P.S can be cut well it may not be at that point yet but we are not a kick in the arse off it...I think the P.S will probably get away in this budget but watch out for 2011 P.S will be hit hardest

tunney

deise blue wrote: »

Never going to happen , what we are going to see is tax rate increases which will hit all sectors - unpalatable I know but has the attraction of being the fairest option.

Given our extremely difficult financial situation Mr. Lenihan will explore all other options before targetting PS workers again and provoking possible industrial mayhem which could fatally undermine the future well being of the country

Fairest for whom?

The_Honeybadger

johnboy_123 wrote: »

Get Real mickey ...so you dont think home owners who have already paid a shed load on stamp duty wont put up a fight...I hate to be the one saying this but the croker aggrement has a caveat of if there is a situation where we are under a catastrophic failure event then the P.S can be cut well it may not be at that point yet but we are not a kick in the arse off it...I think the P.S will probably get away in this budget but watch out for 2011 P.S will be hit hardest

I don't need to get real Johnboy, I know they won't introduce a PT, they have even said so, my point is everywhere that there is scope to save money, or generate income seems to be off the table to please some vested interest or the other. I do agree a PT would be unfair on those who have paid stamp duty, but do remember that most houses in this country have no mortgage on them and are fully paid for, and most FTB's paid little or no stamp duty on their houses. There is the poitential to generate alot of money there even if you exclude people who have paid stamp duty in the past 10 years. If we exclude all these ways of saving or generating money all that is left is cutting services, which is the last thing that should be done, there is no easy or even correct answer, but unless B. Lenihan pulls one hell of a rabbit from his hat in December, health and other key services are going to be dramatically affected, but at least our consultants can hang onto the beemers and merc's, so it's not all bad news .

deise blue

tunney wrote: »

Fairest for whom?

Fairest in that a progressive tax system will ensure that those who earn least will pay least tax whilst those who earn more pay more tax no matter what sector they work in.

Would you agree that this is what the Government are most likely to deliver in the budget ?