Varadkar 'determined' to change income tax bands

Taoiseach Leo Varadkar also said the Government wants to help people with the cost-of-living crisis by using 'a combination of pay rises and income-tax reductions'. Picture: Sam Boal/Rollingnews.ie

Taoiseach Leo Varadkar said he is "determined" to overhaul the income tax system, meaning that people would be able to earn up to €50,000 per year before paying the higher rate of tax.

However, he has conceded such a move could take "a few budgets" to achieve.

Mr Varadkar, who had also been pushing for the introduction of a 30% income tax band in September’s budget, has now said that he is “not hung up on that”.

The Fine Gael leader had suggested the 30% rate as a means to help middle-income earners keep more of their salary.

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Mr Varadkar said he is determined to make changes to income tax, but warned it could take some time for measures to be implemented. 

Currently, people begin to pay tax at the higher rate of 40% on earnings over €36,800, though this is due to increase to €40,000 from next month under changes announced in the most recent budget. There are also proportionate increases for married couples and civil partners.

Mr Varadkar has said he wants to increase the standard rate cut-off point to €50,000.

“We’re getting to [a standard rate cut-off point] of €40,000 next year. I'd like to move that up.

“The policy objective that I have set is that we should get to the point where people can earn up to €50,000 a year without having to pay the highest rate of income tax.

“It might take a few budgets to get there," he said. 

But I'm determined that we should, whether we do it by increasing the standard rate cut-off point or by a middle tax rate [of 30%]."

Mr Varadkar said the Government wants to help people with the cost-of-living crisis by using “a combination of pay rises and income-tax reductions”.

“I believe that work should pay," he said. 

"And I think that, in Ireland, people have to pay the highest rate of income tax on very modest incomes.

“But certainly if the public finances allow it, I would like to see us continue on that road, so that you will be able to earn more without having to pay the highest rate of income tax.

“We’ve moved a long way in the last couple of years on that. And I want that to continue.”