Parties at odds over tax change preferences
Fine Gael ministers are keen to widen the bands at which basic income tax is charged, but Fianna Fáil believes more workers will benefit with a straight cut of the Universal Social Charge rates.
Fianna Fáil leader Micheál Martin laid down a marker at his party’s pre-Dáil meeting in Longford where he stressed that the confidence and supply deal between both parties had agreed on USC cuts.
“There have been all sorts of [government] promises and when you look at it, it has been a bit incoherent and confusing to the general public,” he said.
“It is very clear on the confidence and supply [deal], both parties have signed up for a reduction in the Universal Social Charge.
“Our view is the most effective one would be reducing the 5% rate to 4.5%, that would take in 1.3 million people. That would be far more effective than what Fine Gael are proposing which would benefit far fewer on higher incomes where we would benefit people a wider income, particularly low to middle incomes. Anything of up to 70,000 would benefit from our proposal.”
Taoiseach Leo Varadkar recently spoke about people on modest incomes paying the higher rate of tax. He said the Government wanted to change that and have fewer people hitting the higher level.
Currently, a single taxpayer is liable for the higher rate of 40% after earning €33,800.
Increasing the band would help those earning above this as it would mean that portion of pay is taxed at the lower rate of 20%.
Fianna Fáil in recent days has stressed that it would prefer to see a direct reduction in the USC — as agreed in the government support deal — and the Government would need to “pull a rabbit out of the hat” to have the money to do this as well as tweak the income tax bands.
Mr Martin said backing for the Government and the budget was dependent on the support deal and the pledges therein being implemented.
“There is room in terms of the budget in our view that if reductions have to come to have to adhere to what is contained in the confidence and supply. It is very clear from the outside that what underpins our support for the budget is the confidence and supply.”
Asked again yesterday about the diverging views on the tax cut route for the budget, Mr Varadkar said no decisions had been made yet.
But the Taoiseach said “one of the most effective ways” to help workers was to ensure fewer people paid the higher tax rate.
Finance Minister Paschal Donohoe said the Government “respected” the confidence and supply agreement. It had three priorities, he said, which included helping the self-employed, reducing USC further and merging it with PRSI while also reducing the level of income tax people paid.
Meanwhile, Mr Martin launched a scathing attack on the new Taoiseach, claiming Mr Varadkar was more about spin than results. During a private speech to TDs and senators, he said the Government buried bad news on busy days.
“A lot of people have been commenting about how the new Taoiseach is putting his primary emphasis on presentation. It’s hard to disagree with this.
“There is a preponderance of staff involved in media announcements and spin.
“The Taoiseach saw no need to hire an expert on economics, or housing, or health but immediately appointed a marketing expert to his team.”
Mr Martin noted the new Taoiseach now had a press office, an information service and a strategic communications unit.
“For the Government, the time for spin is over,” he said.
