Opposition parties divided over tax reforms

Potential coalition government partners Fine Gael and Labour today outlined their alternative budgets, with the two parties at odds on radical tax reform.

Labour called for a new third 48% rate of tax for the biggest earners but Fine Gael claimed the new band would impede job creation, enforce emigration and put off multinational executives from coming to Ireland.

Fine Gael said their plan would save €5bn, create 100,000 jobs and collect €1bn more in tax.

Labour said its reforms could save €4.5bn by hitting top earners on more than €100,000 a year and slashing the public sector pay bill by €1.4bn by 2014.

Michael Noonan, Fine Gael finance spokesman, said he did not believe that the Government can tax its way out of the recession.

“I don’t share the view that the country is banjaxed,” he said.

“I think we in a difficult position but I think with a proper portfolio of policies that stimulate growth in the economy and give us job creation, we can work our way out of this.

“It will be tough but achievable.”

Labour leader Eamon Gilmore said the Government’s plan to make €6bn cuts in one year was dangerous for Ireland.

“It poses an unacceptable risk to jobs and growth,” Mr Gilmore said.

Fine Gael said their approach would be to narrow tax bands, remove credits and savage any remaining tax breaks in the property sector. It will also close down Fas and the Health Service Executive and reduce TD and Senator numbers by 35%.

Mr Noonan said Fine Gael would take money “by and large” from those who can afford it.

Party leader Enda Kenny conceded he believed the Government’s plan was moving the country in the right direction but more could be done.

“There is a better way, and a fairer way, than anything offered by the current failed Government. Fine Gael will make jobs and economic growth a precondition, not an aspiration,” Mr Kenny said.

Labour’s plan was headlined with the new 48% tax rate for a single worker on €100,000 or married couple on €200,000.

They also plan to cap public sector and political salaries at €190,000 euro and increase the tax on savings.

But the party’s strategy to cut the public sector pay bill was light on numbers of lay-offs and focused more on achieving efficiencies.

Mr Gilmore said the Government’s planned €6bn cuts would be too hard to swallow and create another year of stagnation on the Irish economy.

“Having endured so much, and having been promised that the corner was being turned, the danger is that the Irish people will have to suffer another year of little or no growth, and more joblessness,” he said.

Labour accused Fianna Fáil of surrendering to pressure from the European Union in agreeing to €6bn cuts.

Mr Gilmore said the Government’s own figures made it clear that an adjustment of more than €4.5bn was self-defeating.

“Labour does not share in the conservative consensus that the route to recovery is via ever greater pain being inflicted on the Irish people,” he said.

“What Ireland needs is a Labour-led government that will stand up for Ireland’s interests.”

He added: “Fianna Fáil’s four-year plan is an abject surrender of Ireland’s national interest.”

Joan Burton, the party’s finance spokeswoman, said: “The Irish economy is not yet in recovery mode, so the application of draconian austerity ’shock treatment’ runs the risk of causing long-run damage.”