Tax breaks for lower and middle-income earners are to play a central role in the Government’s roadmap for October’s budget of up to €1bn extra spending, which will be published today.
The improving economy will allow the Government fast track commitments to deliver better services and major capital projects as well as permitting the establishment of a multi-billion euro rainy day fund, it can be revealed.
The commitment to establish a rainy-day fund is part of the plan to help buttress the country against any future financial shock.
Finance Minister and Public Expenditure Minister Paschal Donohoe will today publish the Summer Economic Statement, in which the broad parameters of the budget are to be set out.
Among the key messages of the statement is that the improving economy and the improving finances will allow the Government to meet some of the “social challenges in a more timely manner than we previously envisaged,” sources have said.
“We will maintain the line on sensible spending vigorously. We will act on the commitment to increase the amount of money for capital spending. Minister Donohoe will restate his commitment to reform the public services,” the source said.
Mr Donohoe confirmed last night that the statement will go before cabinet today for approval. While the statement will not specifically refer to individual tax measures, it is understood that the Government is seeking to reduce the rate of capital gains tax for new start-ups to 10% from 2017 (held for five years and subject to a €10m cap on gains).
It is also believed Mr Noonan intends increasing tax credits for self-employed in a bid to bridge the gap between the tax levels they pay compared to PAYE workers. The Government has committed to increasing the earned income tax credit from €550 to €1,650 for the self-employed, to match the PAYE credit, by 2018 and it is understood October’s budget will see the level increase to €1,100.
Mr Noonan is keen to make the country’s personal taxation system more competitive and a main plank of his plan is to phase out the universal social charge.
This will be part of a wider medium-term income tax reform plan to be published for consultation with the Oireachtas Committee on Finance by July and for approval by the Oireachtas in October. The Government will work with the Oireachtas to spend at least an additional €6.75bn in delivering public services by 2021 compared with 2016.
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