Varadkar rules out tax cuts in forthcoming budget

Ireland is also 'not yet in a position' to back a global move for an effective tax rate of 15%, the Tánaiste said

There will be no cuts to income tax or USC due to the Covid-19 debt, says Tánaiste Leo Varadkar. File Picture: Leah Farrell / RollingNews.ie

Leo Varadkar has ruled out any income tax cuts or a reduction in the Universal Social Charge as part of the upcoming budget.

Ireland is also “not yet in a position” to join the consensus in adopting a global minimum effective tax rate of 15%, the Tánaiste said, however, he added that “we do remain committed to the process”.

Mr Varadkar said the move to a global minimum tax rate “isn't just about tax justice and big companies paying their fair share of taxes”, but instead is also about big countries "trying to gain tax revenues at the expense of smaller countries like Ireland”.

He said Ireland would continue to strongly defend its position.

Turning to income tax, Mr Varadkar warned that there will be very little wiggle-room in October's budget as the Government looks to tackle significant Covid-related debt.

We're not going to be in a position to cut income taxes and USC in the forthcoming budget," he said.

"We have a big budget deficit as you know, we have a big national debt.

"We also need to increase spending in crucial areas like housing, for example."

However, he suggested that there will be further moves to ensure people do not enter the higher tax bands.

"We will honour our commitment that we made to the people at the last election as contained in the programme for government, that we will index tax bands and that means avoiding a stealth tax increase, whereby more and more people every year, fall into the higher tax net whereby more and more people every year end up paying more of their income at a higher rate," he said.

Ireland is an outlier. We have the fourth-highest marginal tax rate in the Western world and people on very modest incomes, earning as little as €40,000 a year, pay the highest tax rate.

"It's not a tax cut in my view, and very few economists would describe in the tax cut — it's avoiding stealth tax increases, which we have seen too much of, I think."