Risk & Economy » Regulation » €15bn savings and a cut in the minimum wage: Ireland’s austerity budget

€15bn savings and a cut in the minimum wage: Ireland's austerity budget

The country retains low corporation tax rate but raises VAT

(SHARECAST) – The Irish government has unveiled a four-year plan of hefty tax rises and deep cuts to address the huge deficit that forced the former Celtic tiger to accept a European Union bailout.

The package includes reducing the minimum wage by €1 to €7.65 (£6.50), raising VAT to 22 percent from 21 percent in 2013 and to 23 percent in 2014 and cutting public service staff levels by 24,750, to levels last seen in 2005.

However, the country has managed to retain its treasured 12.5 percent rate of corporation tax, despite complaints from other EU countries that it gives the country an unfair advantage.

Tax rises will contribute two-thirds of the savings required by the plan, which aims to save €15bn, with the remainder coming from cuts.

The harsh measures come in the wake of Ireland’s acceptance of a bailout from the European Union and the International Monetary Fund that is expected to cost more than €80bn.

The plan is still hypothetical as the government – one of the most unpopular in Ireland’s history – has called a general election to be held early next year.

The government said of the plan: “Detailed policy measures identified in the plan will build on our strengths and develop other sectors to provide a balanced economy and employment for our citizens.”

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