Carbon tax hike planned in budget 2021, but income tax won't change

Minister for Public Expenditure Michael McGrath said "no decisions have been made on core social welfare rates"
Carbon tax hike planned in budget 2021, but income tax won't change

Budget 2020: carbon tax will increase but there will be no change in income tax rates, the finance minister has confirmed. Pictured earlier this month at Dublin Castle are (l to r) Minister for Finance Paschal Donohoe, and Minister for Public Expenditure and Reform Michael McGrath. Photo: Sasko Lazarov/Rollingnews.ie

Income tax will not be touched in the upcoming budget but carbon tax is to increase, the Finance Minister Paschal Donohoe has confirmed.

The Government is now working on the assumption that Britain will crash out of the EU in January without a deal and will be borrowing between €15bn and €19bn next year.

Minister for Public Expenditure Michael McGrath has warned "there isn't anything that the Irish Government could do that will come close to matching the scale of the disruptive impact" a no-deal Brexit will have.

Although there will be no broad-based increases or cuts to income taxes, carbon tax is set to be hiked again in next month's budget and is expected to go up by another €6 per tonne.

Mr McGrath said "no decisions have been made on core social welfare rates". However, he ruled out an revision of Pandemic Unemployment Payment (PUP) rates.

While the PUP scheme will now remain open to applicants up to the end of the year the rates have been changed.

From tomorrow, September 17, three rates of payment at €300, €250 and €203 per week will apply depending on how much a person earned before the pandemic.

The Finance Minister said Budget 2021 is being drawn up against the background of the continued economic, financial and wider societal fall-out from the Covid-19 pandemic and against the threat of a disorderly Brexit.

Mr Donohoe said: “Government has acted decisively this year to counteract the worst effects of the pandemic, with support measures of around €24.5bn provided to date. 

Put simply, this level of support is unprecedented, and has been appropriate given the scale of the economic shock.

“For next year, work is ongoing at an official level but, at this stage, a budget deficit in the region 4.5% and 5.5 per cent of GDP appears to be in prospect; this includes continued substantial Covid-related expenditure, albeit not at the same level as this year."

Mr Donohoe said up to €19bn will be borrowed next year but additional policy decisions - to be announced on Budget day – will add to this.

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