Taoiseach Leo Varadkar has defended his proposals to cut income tax, claiming Ireland’s current regime acts as a “disincentive” to people entering the workforce.
Mr Varadkar claimed his plans not only made economic sense but they would also allow people to keep more of their “hard-earned cash”.
“The fact that our higher rate of income tax in Ireland kicks in so soon is a disincentive,” he said.
“It’s not just the unfairness of taking so much money out of people’s pockets, it’s also the fact that when we’re competing for jobs with the United Kingdom and competing for talent and investment, we put ourselves at a disadvantage by having a higher income tax rate that kicks in below average incomes.”
The Taoiseach made the comments at the launch of the Government’s Future Jobs strategy in Dublin where he warned there was no scope for complacency about the economy.
It came after he was criticised by opposition members over his proposals to reduce income tax over the next five years.
At the Fine Gael party Ard Fheis last weekend he pledged that if the Government was re-elected his government would increase the point at which people pay the top rate of tax from 35,000 to 50,000 euro for a single person or 100,000 euro for a two-income couple.
Mr Varadkar told the Department of Business’s jobs seminar the current tax system was one of the reasons Ireland had lower labour market participation than it should.
He said workplaces needed to become more family-friendly and that women in particular needed to be encouraged back into the workforce.
“So many parents, mainly women who could return to the workforce, do that obvious calculation that, if their partner is using up their tax allowances, if they go back to work 52% of it is gone in tax and PRSI,” he said.
“Even if childcare costs nothing, 52% would still be gone in tax and PRSI.”
He added: “It’s not just a case of allowing people to hold on to more of their hard-earned cash, it also makes sense on economic grounds to ensure we’re competitive with other countries.”
Over the next couple of years, he said, capital gains taxes, which were increased during the austerity years, needed to be examined, and he also wanted to complete the process of ensuring the self-employed were treated in the same manner as PAYE workers.
While open to other changes, he said there was “no way” Ireland would change its 12.5% corporate tax rate.
“There is political consensus that it shouldn’t change our corporation tax rate but we do need to acknowledge that business has changed and technologies have changed,” he said.
“There will be international tax changes coming down the line and we need to make sure we’re on the right side of history and we get ahead of those.
“Those big companies who make large profits should pay their fair share of tax and some of them aren’t doing that at the moment.”
More than 160 stakeholders who play a role in creating jobs attended the summit.
They also heard that with unemployment down from a peak of 16.1% to 5.1%, the focus would switch from getting people back to work to creating jobs that embrace new technologies.
- Press Association