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No increases to income tax for next five years, vows Taoiseach

Lockdown household savings 'can be boost'

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Micheál Martin said there would be no income-tax rise

Micheál Martin said there would be no income-tax rise

Micheál Martin said there would be no income-tax rise

Therewill be no income tax increases over the next five years, Taoiseach Micheál Martin has pledged.

Despite the rising cost of the pandemic and the estimated €25bn budget deficit, the Taoiseach said he will "honour the commitment" not to increase income taxes over the lifetime of the Coalition.

"Income tax, we have said, we're not going to increase," he said.

However, Mr Martin did signal some changes to the PRSI system to fund more social welfare supports for workers, such as pensions or redundancy payments.

Mr Martin said he is banking on people dipping into household savings they have accumulated during months of lockdown to help the economy rebound after the Covid-19 crisis.

The Fianna Fáil leader said the Programme for Government contains a commitment not to increase income taxes for the next five years.

"That said, we'll be borrowing about €40bn between 2020 and 2021.

"The deficit this year is about 6.5pc. 5.7pc is the target next year," he added.

Mr Martin said the Government has been able to borrow very cheaply during the pandemic and added that the focus after the Covid-19 crisis will be to reduce that debt.

"We have received different analysis in terms of what would happen ideally in a post-Covid environment," the Taoiseach said.

"You've about €12.5bn in household savings extra this year than you would have had last year and that's quite significant.

"That could be released into the economy over time when people become less cautious and worried about the Covid impact on their own personal lives."

However, Mr Martin warned there might be "areas of revenue generation that cannot be ruled out".

Difficulty

The Taoiseach said the recently established Commission on Pensions may recommend changes to the PRSI system to fund pensions.

"That would be more specific to the social insurance fund or to improvements I mentioned earlier: the living wage or indeed better redundancy mechanisms, for example, for workers that are in difficulty," he said.

"So, you could be looking at a reorganisation of some of your social supports as well, which may necessitate some revenue-generating measures that would be exclusive to that or applicable to that area.

"But that's all to be worked out in terms of recommendations that will come from the pensions commission."

The Programme for Government says tax credits and bands will be indexed linked to earning from Budget 2022 onwards if incomes rise again as the economy recovers.

It will aim to ensure fewer people on low incomes are taken into the tax net and to make sure more people are not paying higher income tax and USC rates.

There were no significant income-tax cuts in the last budget due to the cost of responding to the coronavirus pandemic.

During coalition negotiations, Fine Gael pushed to ensure there was a commitment in the Programme for Government not to increase taxes for workers for the next five years.

The Government has plans to introduce a new auto-enrolment pension system which will see the State match contributions made by workers towards their individual pension fund.

A Commission on Pensions is currently examining a number of issues, including the age at which the State pension is paid to people who have stopped working,

The pension age became a General Election issue after Sinn Féin, the Labour Party, the Green Party and the far left campaigned against a Government commitment to increase the pension age to 67 this year. Fianna Fáil was initially in favour of increasing the age but performed a U-turn during the campaign to say the party would prevent the increase or offer a similar payment to those waiting for the full pension.

Fine Gael is in favour of the increase.

The issue was a sticking point during Programme for Government negotiations between Fianna Fáíl, Fine Gael and the Green Party.

The three parties finally agreed to delay the increase.


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