What now for refunds
A million Irish households paid the controversial water charges with some customers paying up to €325 or a total of c€325 million.
According to the Housing Minister, Simon Coveney, the state then paid €89 million to approximately 890,000 households in the form of the €100 annual water conservation grant.
Now that the politicians have agreed that there will be no future water charges and that water expenditure will come of out of general taxation – and assuming that deal is approved by the EU Commission - the logistics around the refund scheme will be complicated and slow. Not every household paid the same amount (my household didn’t pay the fourth water charge instalment and didn’t apply for the conservation grant). Another c1.3 million households refused to pay any water charge but some received the €100 grant, as this was presented as a universal payment. Will they be required to refund the €100?
The Minister has said that there has to be fair treatment for everyone so you probably shouldn’t count on any refund too soon, even if you could use the money urgently. This isn’t just because of the administration complications or the response of the European Commission but because there still needs to be some clarification about how the government intends to pay for the c€400 million repayment.
Optimists in the Department of Finance are already hoping that tax revenue will pick up again for the rest of the year (after less than stellar returns last month). If revenues soar in Q2 and Q3 it may be sufficient to not just meet this huge refund but enough to also the usual multi-billion euro HSE over-runs, the Children’s Hospital construction over-run, the cystic fibrosis drug costs and potentially large compensation payments to mother and baby home claimants.
If the current Revenue surplus estimate for this year does not improve, and all the promised Budget ‘17 spending allocations are made, there won’t just be much to give away in Budget ’18 next October and the Government, which is very close to balancing the Budget for the first time in nearly nine years, will be forced to undertake more borrowing than was intended for 2018.
Irish Water has been a fiscal and political disaster from the start with massive staff and cost overruns. Other costs have soared – for security and legal challenges and parliamentary investigations. Millions more may still have to be paid in fines to the EU.
The political ‘return’ from the Irish Water disaster will only be known in the next election, but someone is going to have to pay for the higher ongoing water costs and the most obvious sources of revenue will be businesses, via higher general rates imposed by local authorities; higher direct income taxes; a new flat percentage levy on higher earners like the Universal Social Charge or even a water levy added to local property tax, which has been frozen until 2019.
Imposing either a new water Social Charge on higher earners and the self-employed earning more than €100,000 is already a successful tax policy or a water levy on property, paid directly to the Revenue Commissioners with their impressive, wide-ranging powers, in particular the sending of the Sherriff to your business or home, could be very tempting. Property owners are already extremely compliant (as are employers) and would simply have to adjust their respective payments to the Revenue.
Last year it was estimated that Irish Water would need €5.5 billion or about €1.2 billion a year for operating costs and investment. Only about €700-€750 million would have been raised from household water charges so adding €1.2 billion to annual borrowings for water services isn’t going to happen if the Exchequer’s plan to return to surplus by 2019 stays on track. (The gross national debt is €204.77 billion with interest payments alone expected to be about €8 billion this year.) A water USC charge or LPT water levy of €1.2 billion is far more feasible.
If you don’t think so, just remember that between 2011-16 the Minister for Finance collected €2.4 billion in cash from the retirement savings of just over 800,000 private pension holders. It was easily collected because the pension companies were threatened with significant cash penalties if they didn’t pay over their customer’s cash to Revenue.
Water services will be paid for one way or another. Not by people whose income comes from welfare payments or who earn less than €17,000, the cut-off for USC. The easiest way to bring in €1.2 billion will be to force employers to deduct it at source or to add it to fearful property owners tax bill.
And if you have a problem with that…you can just take it up with the Revenue.
Please send your queries to Jill c/o this paper or by email: email@example.com
(The new TAB Guide to Money Pensions & Tax 2017 is now out. €9.99 in good bookshops. See www.tab.ie for ebook edition.)