Saturday 22 October 2016

Noonan will drop marginal rate of tax below 50pc and change USC rules in 'big bang' giveaway

Ministers Brendan Howlin and Michael Noonan
Ministers Brendan Howlin and Michael Noonan

The Government is planning to lower the marginal rate of tax on incomes from the current level of 51pc to at least 49.5pc.

Last night, Government sources said there was a “strong desire” to further reduce the tax burden on middle-income earners to 49pc, if it proves achievable.

With the Budget just over a week away, officials have concluded the bulk of their work on proposals, with the discussions now “firmly in the political realm”.

While the Budget plans are not yet finalised, there is a strong desire within both Fine Gael and Labour to deliver a 2pc tax cut, should the numbers allow it.

“We would love to do it, but certainly at this stage we are looking at a 1.5pc cut,” said one well-informed Government source.

A series of key meetings will now take place between the  Finance Minister Michael Noonan and Public Expenditure Minister Brendan Howlin and their Cabinet colleagues this week.

Once these face-to-face meetings are concluded, Mr Noonan and Mr Howlin will bring a draft Budget document to the Economic Management Council, on which they sit with Taoiseach Enda Kenny and Tanaiste Joan Burton.


Both Fine Gael and Labour have realised the merit of reducing personal taxes, with the overwhelming focus of the cuts on the burden of the Universal Social Charge (USC), particularly for those earning €70,000 or less.

Mr Noonan is also looking at a combination of a cut to the 7pc rate and raising the entry point at which people start paying the USC.

“The net effect when both measures are combined will be 2pc,” said a senior Government source.

Coalition sources have confirmed that the USC cut will be used as their “big bang” giveaway to workers.

It is understood that the entry point at which people begin paying will be raised to bring more than 500,000 people out of the USC.

However, it is also known that the 7pc rate will also be reduced by up to 1.5pc.

Mr Noonan is also believed to be looking at reducing the gap  between self-employed people and PAYE workers on incomes above €100,000.

At present, self-employed people earning in excess of €100,000 pay USC at 11pc, while PAYE workers pay 8pc.

Meanwhile, Lucinda Creighton’s Renua are proposing a levy on all public sector pensions over €60,000 in an effort to claw back excesses on large pensions paid to former Taoisigh Brian Cowen and Bertie Ahern and senior former top officials – some of whom have pensions in excess of €100,000 a year.

This policy is aimed at former top politicians, officials and other senior office holders who benefited from generous pensions on retirement.

“When they imposed a levy on private pensions during the financial crisis they defined the limit as being €60,000 per annum,” said a Renua spokesperson. 

“This is a very high income by comparative standards and, accordingly, Renua Ireland believes that no public servant should be in receipt of a gross pension exceeding this sum.”

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