The last of the so called “austerity budgets” is due in October – and it looks like another €2 billion of savings will have to be made. This will mean increases in taxation and more cuts to public spending. This all comes after the Property Tax , Water Charges , USC and cuts to welfare benefits and child benefits over the past 4 years.
Ireland has taken €30 billion euros out of the economy since 2008 by hiking taxes and slashing spending – and here are some of the IMF suggestions for Budget 2015 -: it will be interesting to see if any of these are implemented.
Welfare: – Once again they point out that we should target some social supports in a better way instead of paying them to everyone. The IMF say that the combined spend on child benefit, the household benefits package and the subsidy on student fees is about 2 percent of GDP annually.
The IMF also point out, as they did in previous years , that the medical card means test for people over 70 is much more generous than for under 70’s.
They suggest that “realistic gradual reductions” in these schemes , through better targeting , could yield annual savings of 1 percent of GDP.
Taxation:
The IMF suggest that the government should focus revenue efforts on broadening the overall tax base rather than rate hikes.
VAT : They suggest expanding the number of products covered under the standard VAT rate, (which could yield up to 1 percent of GDP) or eliminating the 9 percent reduced rate for tourism related activities (with potential revenue impact of up to ½ percent of GDP ).
Personal income tax : They suggest reducing the main income tax credits and lowering the entry point (potentially yielding ½ percent of GDP, based on a 7 percent reduction in credits and tax bands).
Spending:
Health: Suggested reforms include improving the financial management system, promoting greater use of primary care rather than hospital stays, and further reducing pharmaceutical costs.
Higher education: Once again the IMF suggest the introduction of a student loan scheme and a new funding model that better takes into account skills priorities and links college fees to the costs and earnings potential of courses.