Varadkar’s proposed new 30% rate of income tax 'will not be happening'

Leo Varadkar had suggested the introduction of the new 30% rate as a means to help middle-income earners keep more of their salary.

Tánaiste Leo Varadkar said he would 'not going to go to war with anyone' on budget measures. Picture: Gareth Chaney/ Collins Photos

Tanáiste Leo Varadkar’s proposed 30% rate of income tax will not form part of the budget later this month, according to sources familiar with the budgetary process.

Mr Varadkar had suggested the introduction of the new 30% rate as a means to help middle-income earners keep more of their salary.

However, it is understood that officials “do not see the merit” in having a ninth tax rate in the system.

A source told the Irish Examiner there were already eight different tax rates at different levels of income and “simplification is what’s needed in the tax system, not more complication”.

Sources confirmed that the entry point at which people pay the higher tax rate of 40% will be raised as a way of helping middle-income earners in the budget.

There will be a change in the rate, but it hasn’t been decided just yet,” a source said.

Leo Varadkar told RTÉ’s This Week programme he would not be “going to war” with anyone if the 30% income tax band did not happen.

He said it was an option he has asked to be considered. 

“It will take a while to put into place, but it can be done," he said. "It would benefit over a million taxpayers, but we shouldn't lose sight of the objective here.

“I'm not going to go to war with anyone on which one we do now, but it is important that we have a meaningful tax relief for those middle-income workers in this budget.”

Hospital charges

Meanwhile, it is understood a “key ask” of the Department of Health is to abolish hospital charges for adults.

It is expected that charges of €80 a day, up to a maximum of €800 a year, will be slashed, but “no firm decision has been made yet”, according to sources.

The Government has already moved to abolish in-patient hospital charges for children, a measure which is due to come into effect in the coming weeks.

Health Minister Stephen Donnelly has also flagged in recent months that he would be pushing for State funding for IVF fertility treatment for couples.

Despite speculation in recent weeks that this measure would be difficult “to get over the line”, it is understood there is “strong political support” for it.

While no agreement has been made yet, officials from the Department of Health and the Department of Public Expenditure will “discuss the logistics” in the coming days.

Social Welfare

Increases in core social welfare payments are likely to be €10, and not €15.

But sources have said people will see money back into their pockets through a number of other measures including energy credits, a double welfare week between now and Christmas, as well as a Christmas bonus.

An increase in the living alone allowance “is also on the table” as it targets single-person households.

The weekly rate is €22 and is an extra payment for people on social welfare who are living alone.

It is likely to be increased, although a figure yet to be determined, as it will further help people who are not sharing the cost of household bills with another adult.