Noonan outlines tax policies ahead of Budget day

Noonan outlines tax policies ahead of Budget day

Finance Minister Michael Noonan has surprised his Cabinet colleagues by outlining his details of his intentions for Budget day in relation to tax policies writes Irish Examiner Political Editor Daniel McConnell.

Mr Noonan outlined his plans to reduce the Universal Social Charge (USC) and an increase to inheritance tax thresholds at a meeting of the Cabinet today.

Mr Noonan is said to have said it will be difficult to avoid giving more USC relief to higher earners as they have endured the most burden by way of the emergency tax.

"He said it would be tricky to give more back to lower income earners when they were not affected by USC that much in the first place. Without meaning to sound regressive, he said it will be difficult to avoid cutting USC and giving more to higher earners," said one source.

The Government has committed to about €1bn in additional extra spending in the Budget for 2017, which will be split on a 2:1 basis between spending increases and tax cuts.

The Irish Examiner understands that Mr Noonan told his colleagues that he will increase the threshold at which people begin paying the USC from just under €13,000 to a level close to €17,000.

Mr Noonan detailed that he is likely to reduce the lowest two USC rates by half a point each - from 1% and 3% to 0.5% and 2.5% respectively.

The veteran minister is also likely to increase the point at which inheritance tax will begin to be charged.

Last year, Mr Noonan increased the threshold to €280,000 from €225,000 and sources said he mentioned a figure of €20,000 in terms of an increase this time.

This is part of a process to eventually raise it to €500,000 over several budgets.

Budget 2017 will be presented on Tuesday October 11.

Despite this increase, sources have said Mr Noonan does not believe he can reduce the 33% rate at which the tax is applied.

This rate increased in 2009 from 20% on foot of the financial emergency which had engulfed the country.

As part of a means of bridging the gap in the rate at which PAYE workers and the self-employed people are taxed, PRSI tax credits are also to be extended.

Some have suggested that the “earned income tax credit” of €550 which was announced last year and it is likely to be doubled come Budget day.

Public Expenditure Minister Paschal Donohoe also called on his fellow ministers to temper their Budget day expectations and said he expected their final submissions by no later than Friday.


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