The 26-County Minister for Finance Brian Cowen today [Wednesday] announced a major reform of stamp tax on residential property and a large increase in taxes on cars in his fourth Budget delivered to the Dublin parliament.
Mr Cowen said a “measured deceleration” of economic growth was required and “not a sudden slamming of brakes.” He told the Dail that he was framing the Budget in the context of economic growth slowing from around 4.75 per cent this year to around 3 per cent in 2008.
The Budget was seen mainly as an attempt to boost the ailing construction industry, which has close ties to Cowen’s Fianna Fail party.
The Minister announced that stamp tax on property will now not apply on the first 125,000 Euros of the cost of a house. A rate of 7 per cent will apply between 125,000 and one million Euros and 9 per cent will be applied on the rest.
The new regime takes immediate effect.
The current exemption for first-time buyers will be retained. However, the rule requiring those benefiting from this exemption to live in the house for at least five years will be changed. Under the new rules this will be changed to two years, Mr Cowen told the House.
Mr Cowen unveiled a new system of vehicle registration tax (VRT) for new cars, which he said was “not about penalising people” but about helping the environment.
The new system will see the introduction of a seven-band system based on carbon dioxide emissions and not on engine size. Rates will range from between 14 per cent and 36 per cent, penalising larger vehicles, and will be introduced on July 1st, 2008.
Public transport has been allocated O1 billion, and education has been given O9.3 billion, which includes O95 million in capital funding for primary school building projects.
The contributory old-age pension will rise by O14 a week to O223, and the non-contributory pension will rise O12 per week, bringing it to O212. The carers’ allowance will rise by O14 a week.
Child benefit will rise O6 a month to O166 for first and second children, and by O8 for third and subsequent children, bringing it to O203 a month.
The early childcare supplement will rise by O100 bringing it to O1,100 per annum for children under the age of 6.
Cigarettes will rise by 30 cent per packet of 20 from midnight tonight, Mr Cowen said. Alcohol and the price of fuel are unchanged.
In concluding his speech Mr Cowen said Budget 2008 had been framed against “the most challenging backdrop experienced in a considerable number of years.”
“Growth is moderating, the international financial markets have been turbulent and the global outlook is uncertain. Rather than adopting a conservative, cautious stance, I believe we must respond to the challenge by taking determined action and pushing ahead with renewed vigour.”
Budget 2008 has been criticised for a lack of ambition by the Opposition despite the radical reform of Stamp Duty by Minister for Finance Brian Cowen.
Sinn Féin finance spokesman Arthur Morgan said the Budget exposed Mr Cowen’s “unrealizable pre-election promises”.
Morgan said Mr Cowen had delivered a “minimalist Budget” which would be a disappointment for workers on low and medium incomes. He said the benefit of increasing income tax thresholds and social welfare payments would be lost by the higher cost of living.
Mr Morgan criticised the O1.7 billion allocated to social housing and the failure advance a state pre-school system.
And he said increases in child benefits “do not go nearly far enough to assist families unable to cope with childcare costs equal to a second mortgage”.
The minister’s “spend-and-borrow” Budget was “sloppy, self-indulgent and wasteful”, said Fine Gael’s Richard Bruton. He singled out a failure to implement public service reforms and “expensive bureaucratic structures [which] parallel the civil service” for particular blame.
Labour’s Joan Burton said the stamp duty reform was “a humiliation” for the minister.
Mr Cowen was forced into a embarrassing U-turn during the General Election campaign by promising to abolish stamp duty for all first-time buyers having previously ruled out changes.
The huge loss of stamp duty revenues contributed to the drop in Exchequer revenues towards the end of the year. The 0.9 per cent borrowing requirement announced today was “direct result” of Mr Cowen’s mismanagement of the housing market, Ms Bruton said.
BUDGET 2008 - MAIN POINTS
* New residential stamp duty rate of zero up to E125,000 and a 7% on the excess up to a limit of E1m, 9% thereafter.
* Mortgage interest relief to rise by E2,000 for a single person and O4,000 for a married couple
* Duty on credit cards to fall from E40 to E30
* Band for 20% standard tax rate widened by E1,400 to E35,400
* E84 million extra for Overseas Development Aid
* Excise on cigarettes to rise 30 cents from midnight
* Child benefit to rise E8 per month for third and subsequent children to E203
* Child benefit to rise E6 per month for first and second children to E166
* Non-contributory pension to rise E12 to E212 a week
* Contributory pension to rise E14 to E223 a week
* Motor tax for cars over 2.5 litres to rise 11%
* Motor tax for cars under 2.5 litres to rise 9.5%