BUDGET 2016: Coalition accused of hiding €300m ‘tax hike’

Fianna Fáil has claimed the Government’s €595m budget income tax cut is, in reality, half the headline figure because of a hidden €300m “tax hike” only outlined in support documents.

Party leader Micheál Martin made the claim — which has been dismissed by the Department of Finance — during a lengthy Dáil debate on the Coalition’s last financial plan.

During a lengthy response to Taoiseach Enda Kenny and Tánaiste Joan Burton’s budget speeches, which saw him accuse the Coalition of reaching a “new level of cynicism”, Mr Martin claimed the major income tax cuts linked to the USC rate changes are not what they seem.

Describing as a “clawing back of €300m through the failure to index tax bands”, Mr Martin said the decision has effectively halved the amount of money due to be given back to the public from USC rate changes.

“The obvious purpose of this was to give space for changes which might win a few more headlines,” he said.

Mr Martin’s claim was based on page 18 of the Department of Finance’s Economic and Fiscal Outlook budget support document which stated the “non-indexation of the tax system” will see Government take back €300m.

The “non-indexation” issue relates to the fact income tax rates are usually adjusted to take account of inflation which, the document said, was expected to rise by 1.2% next year, in order to ensure changes such as the USC budget cuts do not push people benefiting from the extra money into a higher tax rate.

While a Fianna Fáil spokesperson described the non-indexation as a “sneaky tax hike”, the Department of Finance dismissed the claim by saying the “only tax increase is a 50c increase in the price of 20 cigarettes” and that “all of the decreases in USC” are outlined on page five of its main budget booklet.

Meanwhile, speaking during the Dáil debate, Mr Martin said the budget was the last throw of the dice for a “deeply unpopular” coalition that had debased the budget process and insulted the elderly with a €3 pension rise after taking €1,200 from them since 2011.

He said Fine Gael and Labour had reached a new level of “cynicism” by “seeking credit for the partial restoration of cuts they said they wouldn’t cut in the first place” and that many of the plans announced on Tuesday are already unravelling.

Mr Martin said it was “clear why Fine Gael wanted to run” to a mooted snap November election given continuing difficulties in health, rural crime, and disability supports. He hit out at inequalities such as the homelessness crisis being given just token provision and said that “in every one of its budgets” the Coalition had given the highest benefit to the highest earners.