Savage cuts to a host of previously “untouchable” state services are now being actively considered by the government as a result of Ireland’s dire financial position.
Following the government’s controversial clampdown on pensioners last week, which has deeply angered thousands of retired workers, and this week was described as having descended into a state of fiasco, Public Expenditure Minster Brendan Howlin and his department are now considering a host of new cuts to services to the elderly and schoolchildren as well as the sale of state assets.
The nature of the cuts, proposed in a new report drawn up by the Central Expenditure and Evaluation Unit (CEEU) in Howlin’s department, seen by the Sunday Independent, have been described as “politically toxic.”
The report, which has yet to go to Cabinet, says that “strong political direction” will be needed to bring urgent completion to the rationalization and abolition of state agencies.
The new report has been revealed only days after the Revenue Commissioners sent letters to 150,000 pensioners warning of extra tax payments because tax authorities were unaware they were receiving state benefits in addition to their private pension.
The move will see some pension incomes cut by up to €8,800 for a couple. Some pensioners deliberately evaded tax, but many more were unaware that they had underpaid taxes until they received the letters. They wrongly believed the State tax system would have notified them of their liabilities.
Then, as anger continued to mount over the letters, pensioner tax controversy descended into farce this week after thousands of retirees were told to pay income tax they do not owe. Revenue officials admitted they will hit 15,000 people who have small occupational pensions with a higher tax bill.
But the tax hit will only be temporary because these people are exempt. That means the taxman will take the money -- for a while -- and then return it to the pensioners.
The reality for thousands of elderly people now is confusion and a sense of alienation, according to Pensions Ombudsman Paul Kenny.
He said it was “disturbing” that people who were not liable for any extra tax on pension income had received letters about the issue.
Taoiseach (Prime Minister) Enda Kenny has called for clarity to be brought to the matter, and said he accepted that the letters had caused “confusion and anxiety.”
The letters followed the introduction of new computer systems that allowed Revenue officials access to Department of Social Protection files. They examined 560,000 files.
Maximum senior citizen pensions add up to just over €24,000 per couple for a year. Now they have been told that if other pensions push them over €36,000 a year -- almost €700 per week per couple -- they will have to pay tax.
Revenue commissioners expect to bring in extra taxes of €45 million this year with the crackdown on the old.
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Age Action, an association that represents the elderly, said some older people had misunderstood their obligations and called for a public information campaign.
Arrangements have been made for an emergency meeting of the parliamentary finance committee this week. Two state agencies, Revenue and the Department of Social Protection, will be called to attend and explain their actions.
Fine Gael TD (member of Parliament) Billy Timmins, a member of the committee, said Revenue’s approach had caused unnecessary concern for people.
Revenue defended its decision to communicate with taxpayers directly. It said public information campaigns didn’t work as well as individually tailored information. It also defended sending out the letter in January, because this would allow the tax liability to be spread out over the entire year.
Revenue also acknowledged they set aside existing rules by sending out letters informing pensioners they will have to pay extra tax.
Under previous rules, Revenue staff did not review pensioners’ tax liabilities unless the person sought such a review.
A retired tax official told The Irish Times, “It was considered more trouble than it was worth.”
He described the Revenue’s decision to seek extra taxes from people who are receiving both a state pension and a private pension as “a cheap shot,” akin to “shooting fish in a barrel.”
Brian Hayes, minister of state at the Department of Finance, said that in the great majority of cases no arrears will be due.
Fianna Fail spokesman on social protection Barry Cowen criticized the Revenue’s handling of the affair. “These pensioners have essentially been labeled tax cheats. This has caused great distress and confusion among many of our most vulnerable older people,” he said.
Columnist and TV host Brendan O’Connor wrote, “Chasing pensioners for back taxes is, of course, technically correct. But it just looks bad, particularly when guys who owe us and our banks billions are still living the good life and seemingly not intending to pay us back at all.”
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