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IMPACT has welcomed the increase in the universal social charge threshold, which means 330,000 people earning less than €10,000 will no longer pay. It was previously charged on all income for everyone who earned more than €4,000. The Irish Congress of Trade Unions (ICTU) had urged the Government to make this change prior to today’s budget announcement.

However, IMPACT and other unions expressed disappointment at the lack of Budget measures to tackle unemployment, although it welcomed the finance minister’s indication that he was to explore union suggestions that €70 billion worth of existing Irish pension fund resources could be invested in job-creating infrastructure projects. A similar measure was recently announced by the British Government.

IMPACT and other unions also welcomed increases in capital gains tax and capital acquisition tax, but said the Government missed an opportunity to introduce a wealth tax. Unions have also criticised VAT increases, saying that other tax changes could have eased the burden on lower income families.

In briefings delivered in the run-up to the Budget, the Economic Research Unit (ERU), established this year with support from IMPACT and other unions, called for six measures to be introduced to boost jobs and the domestic economy. It said all of them could be done within the constraints of the agreement with the EU-IMF ‘troika’.

ICTU continues to oppose the troika’s austerity approach, saying that its devastating impact on domestic demand means it is failing to tackle unemployment and won’t achieve economic recovery. Notwithstanding this, the ERU’s six points usefully demonstrate the fairer alternatives available to a Government that is following the austerity path.

The ERU’s alternatives included an investment stimulus, rebalancing of the universal social charge, tax changes targeted on the wealthy rather than poorer households, a wealth tax, other fairer tax reforms, and measures to address unemployment.

The ERU’s six points are:

1. Introduce a major Investment stimulus based on labour-intensive infrastructure projects like broadband, water and waste, energy retrofitting and the replacement of school pre-fabs. Funds could be sourced from ICTU’s proposal to allow €70 billion worth of existing Irish pension fund resources to be invested, (the British Government has recently approved something similar), resources made available by the European Investment Bank, and the use of remaining resources from the National Pension Reserve Fund.

2. Rebalance the universal social charge (USC) so that less of a burden falls on lower income households. Workers currently pay the USC on all their income once they pass the very low earnings threshold of €4,004 a year. The budget could have substantially raised the entry point to reduce the burden on low income households and compensated by increasing the rate on those who earn over €100,000 a year.

3. Target tax changes on higher income rather than poorer households.  VAT and carbon taxes hit lowest income households hardest.

4. The Budget could have introduced a wealth tax (with exclusions for principle residences) on top of existing income taxes. ICTU says a 1% tax on wealth above €2 million could yield €500 million.

5. Replace VAT and carbon tax hikes with fairer tax reforms. These could include a temporary corporate levy so that corporations, as well as citizens, would be contributing to the increased tax burden (ICTU says a temporary 2.5% levy on corporate profits would not be onerous). Other measures could include fairer capital gains tax, a clean-up of tax breaks, higher DIRT tax, and a financial transactions tax.

6. Adopt policies to seriously address the unemployment crisis. The requires a halt to austerity policies, which are contracting the economy, and an investment stimulus package like that set out in point 1 above.

Read the ICTU pre-budget submission HERE