Tax changes to go ahead despite Fianna Fáil warning

The Government still plans to merge the USC with PRSI and alter tax levels for low-and middle-income earners despite Fianna Fáil leader Micheál Martin warning there is not enough money to do both and that it breaches the minority government deal.

Tax changes to go ahead despite Fianna Fáil warning

The commitment to the moves was reiterated by a spokesperson for Taoiseach Leo Varadkar last night, as Finance Minister Paschal Donohoe prepares to hold crunch budget talks with his Fianna Fáil counterparts in the next 48 hours.

Under plans flagged for the past two weeks by Mr Varadkar and Mr Donohoe, the Government intends to change the rate for when low and middle-income earners pay the highest amount of tax in next month’s budget.

The Coalition also plans to merge USC with PRSI instead of ensuring there are cuts to the USC rate, contradicting the confidence and supply deal with Fianna Fáil.

A spokesperson for Mr Varadkar last night said “nobody is talking about breaking the confidence and supply agreement” and that no “firm decisions” have been made as yet on the budget.

The spokesperson said any changes “may take place over a series of years” and that “merging PRSI and USC would potentially include reductions” over a number of years.

On RTÉ radio’s Morning Ireland programme, Mr Martin warned that there is simply not enough money available to do both, saying Fianna Fáil agreed to a USC cut this year, not a merger with PRSI.

“I don’t think you can do both, widening tax bands and merging USC. We don’t believe the resources are there to do that,” he said.

“We want to be faithful to the confidence and supply [deal] in the budget. Both parties are agreeable and have signed up to a reduction on USC [as part of the agreement].

“Our proposal to cut USC from 5.5% to 4.5% would help a lot of people. Fine Gael have signed up to it, we’ve signed up to it.”

Government figures believe the moves could be achieved this year by using any extra income from incoming hikes on the tax on cigarettes, sugary drinks, hospitality, and gambling — all flagged by Mr Varadkar in recent days.

The stand-off is set to take centre stage as Mr Donohoe meets Fianna Fáil finance spokesman Michael McGrath and public expenditure spokesman Dara Calleary over the next 48 hours for budget talks.

Mr Donohoe will also be meeting cabinet colleagues to discuss their spending demands, with Housing Minister Eoghan Murphy and Education Minister Richard Bruton scheduled for tomorrow.

While the Independent Alliance has yet to finalise its exact spending priorities list, it is understood to be in favour of the return of the once-off €850 bereavement grant, flooding defence improvements, and increased supports for carers.

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