Tuesday, October 01 10:57:55
Five years of austerity Budgets have cost the average Irish family E300 a month and nearly doubled their tax bills.
That's according to a pre-Budget analysis released today by Grant Thornton, which calculates the impact of the introduction of new taxes like the Universal Social Charge and Local Property Tax, and the reduction in child benefit on a range of income scenarios.
A family with only one parent earning E40k has seen its tax bill increase by 125pc and a E300 per month decline in disposable income.
A couple both earning E40k per annum, with two children and a house valued at E200k, have seen their tax bill rise 54pc and monthly disposable income fall by E511, it found.
Commenting on the analysis Grant Thornton Tax Partner Peter Vale said that, whilst five years of austerity was necessary to restore economic stability, it's clear that low to middle income earners have paid a heavier price in terms of the percentage increase in taxes they pay.
"With disposable income sucked out of the economy to shore up the government finances it is no surprise that consumer spending remains weak and the strength of any economic recovery uncertain. It's also worth noting that the effective tax rate for well off families has risen close to 40pc, with high earning professionals likely seeing disposable income down a minimum of E10,000 since 2008," he added.
The main driver of increased tax bills has been the introduction of the universal social charge in 2011 at a top marginal rate of 7pc for employees.
The reduction in child benefit for the first and second child from E166 per child in 2008 to the current level of E130 has compounded the impact on disposable income from higher tax rates, and results in a loss of a further E864 per year for a family with 2 children, the analysis from Grant Thornton found.
In absolute euro terms a well off family (primary income earner E150k, and partner E40k) is now E16,345 per year worse off, a decline of E1,362 per month in disposable income.
In terms of specific tax measures, Grant Thornton anticipates that this month's Budget will see an increase in PRSI for the self employed; a reduction in tax relief for pension contributions; further increase in DIRT rate to act as a disincentive to saving and encourage spending; targeted tax reductions linked to job creation and increases in excise duties.
Possible increase in the Capital Gains Tax rate or a change to the computational rules can't be ruled out, it said.
"Many of the tax raising measures for 2014 were introduced last year - such as the full year's property tax and proposed changes to the tax deductibility of pension contributions - and I expect we will see some further tax raising measures introduced in Budget 2014. Whilst there will be ongoing political debate about whether the total budget package should be E3.1bn or a lower amount, the conclusion is still the same: tax payers will dig deeper into their pockets in 2014 than they have in any year since the crisis started," Mr Vale added.
Grant Thornton's research is being published on the day before the release by the Department of Finance of the last set of Exchequer Returns before the budget on October 15th.