Budget 2015 : Some IMF Suggestions

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.

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).

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.