The third rate of tax for high earners would raise nearly €90m, Finance Minister Michael Noonan has revealed to TDs.
Labour TDs proposed hiking up taxes for high earners just before the last budget. Meath East TD Dominic Hannigan explained that Oireachtas party members wanted the fundraising measure introduced in the October budget, as opposed to cuts to services.
“There’s an appetite for this, no doubt. [Labour] ministers are aware of the desire for higher taxes rather than cuts to services. They are battling. There are a lot of Labour Party backbenchers who would like to see this. We expect our ministers to make the case.”
Mr Noonan told Mr Hannigan in a recent parliamentary answer that the Revenue Commissioners had informed him that the introduction of a third rate of income tax of 42%, to be applied on the portion of taxable incomes in excess of €65,000, would generate €87m annually.
This estimate is based on 2013 incomes.
But, Mr Noonan pointed out: “Given the current band structures, major issues would need to be resolved as to how, in practice, such a new rate could be integrated into the current system and how this would affect the relative position of different types of income earners.”
Rebel Labour TD Tommy Broughan was also told higher rates of tax for even higher earners would generate hundreds of millions of euro extra annually. He asked what revenue would be generated if a third rate of tax of 48%, 49% or 50% was applied to those earning over €100,000. Mr Noonan said it would be in the order of €365m, €415m, and €470m respectively.
While Labour floated the idea of higher charges for high earners before the last budget, senior Fine Gael figures oppose this.
Labour TDs had wanted high earners to pay more tax by increasing the universal social charge (USC) for those earning over €100,000.
Labour Dublin Mid West TD Joanna Tuffy, speaking to the Irish Examiner, said: “This should be on the table. Or the USC levy increasing. The USC is a better collecting tax and less subject to tax relief. The problem with a third rate is that some high earners might get around it.
“People have been [telling ministers]. The common ground is that higher increases [in taxes] should be part of what’s on the table.”
A Labour spokesman last week said he was not aware of plans to hike up taxes at this time.
Jobs Minister Richard Bruton said in April that high income-tax rates were hindering investment and new businesses development. The Coalition’s Programme for Government promises that there will be no increases in income tax.
A Forfás report also found that Ireland’s marginal rate of income tax, at 52% for employees and 55% for the self-employed, was higher than most competitor countries.