Government takes aim at middle to high-income earners

By Noel Baker and Conor Ryan

Monday, March 09, 2009

BOTH middle and high-income earners could be hardest hit under proposals currently being considered by the Government to wrest back control of the national finances.

With Department of Finance sources claiming that "all options are on the table", both immediate increases in the new income levy and a range of tax increases are understood to be under consideration.

Even the possibility of some combination of both measures was not being entirely ruled out yesterday, while the Green Party has signalled its intention to press for a new super tax band that would affect those earning in excess of €100,000.

Any measures are likely to be announced by the end of the month, with the exact date for the mini-budget likely to be decided at a meeting of Government this week.

It is understood that a range of options are being considered in advance of the upcoming mini-budget, including tax increases at middle-income earners and cutbacks in social welfare and health care.

One possibility is the introduction of a 2% increase on the 20% rate of tax, a 3% increase on the 41% rate and a new top rate of 48% for those earning more than €100,000.

However, another option is an immediate increase in the existing 1%, 2% and 3% income levies, with a hike in the rate at which the income levy is charged for the remainder of the year.

Some workers currently not in the tax net could also find themselves brought back into the tax fold, while spending cuts are also likely to affect projects under the National Development Plan, while excise duty on alcohol and cigarettes is another option being explored.

Yesterday a spokesman for the Department of Finance said: "No decision has been made, all options are on the table."

Green Party finance spokesman, Senator Dan Boyle, said his party will press for a new super tax to hit those earning more than €100,000 when it sits down with Fianna Fáil to thrash out April’s budget.

Speaking at his party’s convention in Wexford he said the Government will look at tax increases as an emergency measure.

"There is a lot of speculation... and I think the general trends are already well indicated. The size of the gap that has to be filled is large in its own right. And the mechanism that will be used to fill that will, in the short term, be new taxation measures.

"As regards our role in examining first of all the size of the gap and how it can be closed... we will be putting a particular emphasis on looking at the need for a new super tax rate, a third tax rate, for incomes over €100,000. And the negotiations will be talking about the type of rate it needs to be set at in the context of other taxation," he said.

The party said in terms of cuts nothing was ruled out and there were likely to be savings made across all areas — education, social welfare and health.

This appeared in the printed version of the Irish Examiner Monday, March 09, 2009