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Financial Resolutions 2019

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Financial Resolutions 2019\Budget Statement 2019

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Budget Statement 2019

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Snippet Contents:

From opposition, we have sought to influence budgetary policy and to move it in a more progressive direction. We have provided the political stability necessary for Ireland's economy to grow. We have brought about a noticeable shift in the make-up of budgets with an overall emphasis on investment in public services and increased capital investment. This was the platform on which we campaigned in 2016.
This is the third budget under the agreement. I am not here to say that we got everything we wanted. We are not in government, there are no Ministers on this side of the House and we are not in charge of any Departments but we have had some influence on some measures at least in this budget and on the overall mix between expenditure and taxation. Rather than be a spectator, Fianna Fáil sought to use its influence to positive effect. In today's budget, we have made progress on a number of crucial policy areas on behalf of the people. The increased investment in services and vital infrastructure is about four times greater than the money allocated to tax cuts. Capital investment in our economy will increase by a quarter next year. We welcome that the overall general government deficit will broadly be balanced next year. I note that there will still be a structural deficit of approximately 0.7% and I understand the technical reasons for it in terms of the output gap and the calculations but, nonetheless, it is disappointing that we will again miss the medium-term objective of a structural deficit of not greater than 0.5%.
The income tax package announced is modest. To make no change to our income tax system, as suggested by some, would result in people paying more tax next year. Fianna Fáil would not have supported a €3.5 billion budget package that made people worse off. We gave a commitment that we would secure reductions in the universal social charge, with an emphasis on low and middle incomes. Inclusive of the cut in today’s budget, we have secured reductions over the past three budgets in the three USC rates, with the 1% rate cut to 0.5%, the 3% rate cut to 2% and the 5.5% rate cut to 4.5%. Some USC bands have also been widened. We believe these gradual reductions have reduced the burden of the USC in fair and sustainable way.
On income tax, we support the increase in the entry point to the 40% marginal rate of tax by €750. Fianna Fáil believes that people in Ireland enter the higher rate at too low a level of income and this is an important step forward. Had no change been made to the tax system, next year more than 64,000 taxpayers would have moved up to the higher rate of tax and many more would pay more of their income at the higher rate. As incomes rise, a static tax system means people pay more tax. This is a reality and so some changes were necessary in this budget. Fianna Fáil defends and supports this decision. The combined effect of these income tax changes is that an individual or a couple with an income of €45,000 per annum gain the most as a percentage of net income at 0.7%.
In the budget negotiations, Fianna Fáil pushed for an increase in the home carer tax credit. This is a credit given to married couples or civil partners who are jointly assessed for tax where one spouse or civil partner works in the home caring for a dependent person, including children and persons with a disability. For many of them, the €300 increase in the tax credit is €300 into their pockets. This will be of benefit to couples where one spouse or partner stays at home to mind children or someone with a disability. It is my experience that many people entitled to this credit are not claiming it. I urge couples who largely rely on one income to check whether they benefit from this relief.
Last Friday, the Minister announced that Ireland is set to receive an extra €1.1 billion in corporation tax this year.  No doubt this is a positive development but the increasing reliance on corporation tax and on a small number of companies is a key risk facing the economy and our public finances. While on this occasion the announcement was a billion euro extra had it been an announcement of an unexpected €1 billion shortfall in receipts, we would be in a very different environment in terms of this budget. If we cannot predict corporation tax receipts with any degree of certainty, there is a real exposure. In 2011, corporation tax receipts stood at €3.5 billion. In 2018, we are set to receive €9.6 billion under this tax heading. Corporation tax receipts account for more than 17% of the total expected tax take for 2018, 40% of which is paid by ten companies. Another even more startling way of putting this is that approximately 7% of all tax we collect in the country comes from ten multinational companies. It will be great while it lasts, but we have to face up to the fact that this is a risk for Ireland. Corporation tax is a volatile revenue stream.  The UK and the US are lowering their headline rates.