The social protection minister has said the introduction of a third rate of income tax for low and middle earners who have “borne the brunt of the economic pain” should be part of any future discussions on the reorganisation of the tax system.
Joan Burton said that as the country moves out of the bailout crisis towards a better place where employment is recovering and the live register numbers are going down, she wants the extra funds made available to the Government used to help middle income workers caught in the “taxation trap”.
“In the Department of Social Protection we have poverty traps where you see people on rent allowances reluctant to go back to work. Equally there is a taxation trap where we have a very big jump between 20% and 41%.”
Speaking in Killarney, Ms Burton said a third middle rate between the two would help rebalance taxation in favour of those whose incomes have suffered over the past five years.
“There can always be tax traps, and remember the stand-out feature in our tax system is that if you are single and on the average industrial wage of €34,000 to €36,000 you can hit the top rate of 41% much more rapidly than any other country,” she said.
Overall, she said, it would provide for a moderate tax system where everyone contributes but would ensure more people returning to work by targeting assistance or relief at lower and middle income workers.
She said with employment growing, her department was set to spend significantly less this year and reiterated that for every 10,000 people taken off the dole, it saved around €95m in jobseeker payments.
Ms Burton also told the Irish Examiner that the Government would need to tackle tax breaks specifically aimed at well-off people, especially the reliefs provided as “an overhang from the construction sector”.
She said: “We need to go through those breaks with a fine tooth comb to see if they can be used more effectively so the relief is aimed at lower and middle income people.”
Her comments came after party leader Eamon Gilmore signalled a number of times last week that any pick-up in the economy should help hard-pressed families to be able to share in the gain and aspire to higher incomes in the future.
Many of those blamed for the economic collapse were in the banking sector. Public Expenditure Minister Brendan Howlin said that despite the upcoming Oireachtas inquiry, there was still “unfinished business” and he wants to see a judicial inquiry also established.
“Those who were asleep on the job or worse, were malevolent, must be held to account in a public forum,” he said.
Speaking in front of an almost full conference hall, he said there must be a prosecution through the courts for those who amassed incredible wealth during the boom through manipulation of company law.
“The unfinished business that needs to be done is to hold those who are responsible for the doing of it and those who are responsible for the oversight of it to account.”
There are a number of criminal trials in relation to the collapse of the banking sector which are due to begin next year.
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