herald

Sunday 11 December 2016

'Tax cuts and phasing out of USC' as Burton hints at Budget gains

Tanaiste Joan Burton
Tanaiste Joan Burton

Tanaiste Joan Burton has given the strongest indication yet that raising the point at which workers enter the higher rate of tax will form a key part of the Budget.

The Government raised the threshold from €32,800 to €33,800 in last year's Budget, as part of a three-pronged approach which also included USC cuts and a reduction in the higher rate of income tax.

Speaking at the Labour Party think-in in Wicklow, Ms Burton said she wanted the budget to deliver tax cuts for people earning €25k-€70k, adding that Labour is committed to phasing out the USC over a number of Budgets.

Realistic

And she said she believes workers begin paying the higher rate of tax "too early" and that this needed to change.

The statement was supported by Fine Gael sources last night, who said raising the threshold by a further €1,000 would be "realistic".

The same sources also confirmed that the 0.15pc pension levy will be phased out entirely in the Budget.

The levy impacts around 750,000 people who have defined contribution, defined benefit, additional voluntary contribution and self-employed pensions.

Meanwhile, further pledges were made yesterday in relation to the USC and the Government's long-awaited childcare package. In her speech to TDs and senators, Ms Burton said she would like to see the USC phased out over time for low and middle-income earners.

"The job of realising Ireland's immense potential over the next five years, we've the potential to not just reduce - but phase out - USC for low and middle-income workers as part of a structured plan over a series of Budgets," she said.

On the issue of USC, Public Expenditure Minister Brendan Howlin said the tax will "change in its character".

However, Mr Howlin appeared sceptical about the idea of raising taxes on tobacco to create wriggle-room for spending and taxation measures.

The potential for increasing the price of cigarettes was suggested by Finance Minister Michael Noonan last week.

Mr Noonan said that by shoring up an additional €200m in taxes, the coalition could potentially increase spending in other areas. But Mr Howlin said that, at present, close to €1.5bn will be at the coalition's discretion.

"That's a matter of debate. We haven't signed off on any of these matters yet," he added.

Mr Howlin warned there was a lot of "pent-up demand" being created by ministers and that some of the budgetary speculation will not materialise.

Asked about demands for a further €1.9bn in health spending by Health Minister Leo Varadkar, Mr Howlin said this was not realistic.

Restoring the Christmas bonus is also on the cards. The move will see pensioners and social welfare recipients receive a bonus of €115 for a single person and €220 for a couple.

Increases

But on possible increases in the old age pension, Ms Burton warned the Government has a "limited envelope" and cannot introduce all the changes it wants in one go.

Ms Burton has said Labour could have a manifesto drawn up within days. The Labour Parliamentary Party has formally ratified a transfer pact with Fine Gael.

But senior party figures were forced into giving assurances that the deal will not be mentioned on posters or in election literature. Labour TD and former minister Pat Rabbitte told the meeting that failure to agree a pact would send out a message that the party is not proud of its record in government.

Dublin Central TD Joe Costello was the only deputy who expressed concern at the meeting.

The party leadership gave an assurance that no reference of the pact will be included on party literature or posters.

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