Minister for Finance Brian Cowen will reject demands for house stamp duty reform in Wednesday's Budget, though extra mortgage interest relief is to be offered to first-time buyers. Mark Hennessy, Political Correspondent, reports
Mr Cowen is to cut the top rate of tax by 1 per cent to 41 per cent, following better than expected exchequer tax returns last month that showed the arrival of an extra €2.5 billion into the State's coffers.
Getting ready to publish one of the most generous budgets in the State's history, Mr Cowen insists that stamp duty changes now would fuel house prices just as there are signals that they are tapering off.
Under Mr Cowen's plan, a single person would be able to claim mortgage interest relief of up to €8,000 at the 20 per cent tax rate, while couples would enjoy a €16,000 threshold - double the existing figures.
Last night the Progressive Democrats emphasised that the party leader, Michael McDowell, had never sought changes in stamp duty during the lifetime of this administration.
Following the publication of last week's exchequer figures, Mr Cowen will be able to disburse up to €2.75 billion and still predict a 1 per cent budget surplus this year.
The 1 per cent tax cut - which would partially honour the commitment to bring the top rate down to 40 per cent during the lifetime of the Government - would cost €155 million next year and €230 million in a full year.
Although Mr Cowen and Taoiseach Bertie Ahern have consistently said that tax cuts were no longer the Government's priority, both men now believe that the 1 per cent cut is sustainable, on the back of the latest exchequer figures.
Income tax credits are set to rise by up to 13 per cent, a move that would take tens of thousands of low earners out of the tax net, thus allowing the Government to argue that just 20 per cent of all taxpayers pay at the higher rate.
The standard rate income tax bands, currently standing at €32,000 for a single person and €41,000 for couples, are also to be increased significantly ahead of inflation.
Despite mounting signals that a generous Budget is on the way, the Taoiseach, speaking in Dublin yesterday, insisted once more that it would not be a "giveaway Budget".
The Government, he said, wanted to help the less well off and the lion's share of spending would go on social welfare, education and health, particularly on old-age pensions. Child benefit payments are expected to rise by €6-€8 per month, as the Government does not feel under significant pressure to increase them further, since the Programme for Government promises were met last year.
Negotiations between Mr Cowen and the Minister for Social Affairs, Séamus Brennan, however, over a new welfare payment targeted at children at risk of poverty are still underway.
Mr Brennan is said to be determined to create the new allowance, which would, if implemented, be available to working and non-working families, and withdrawn in phases if a family's financial state improved.
Childminders will be allowed to earn up to €15,000 before having to pay any tax, up significantly from the €10,000 threshold first set by the Minister in last year's budget.
The concession, designed then to encourage unofficial childminders, is not believed to have been successful, though no statistics are yet available.
Focus Ireland has urged the Government to spend €2 billion on 10,000 local authority houses and to increase the cap on rent supplement.
State spending on rent supplements have increased dramatically in recent years, rising from €151 million in 2000 to almost €370 million in 2005, while the numbers in receipt of the payment have jumped from 42,700 to over 60,000.
The supplement was capped in 2002 amid government fears that private sector landlords were increasing rents in the belief that the State would pay the bill because of a shortage of accommodation.
Last month Mr Brennan said a further review of the cap, which has been examined twice by officials, would take place before the end of this year.
