FINE GAEL’S MAIN taxation focus ahead of the autumn budget is to increase the income tax standard rate band to move it towards €50,000.
In last year’s budget, the entry point for the higher tax band rate increased by €3,200, to €40,000, meaning a smaller proportion of income is now subject to the higher tax rate.
An option being considered is a further increase on the €40,000.
Last year’s changes resulted in an €800 saving for middle income workers, and €1,600 for middle income couples.
Fine Gael is understood to be pushing for a similar tax package this year.
Speaking at the Fine Gael parliamentary party this week, Taoiseach Leo Varadkar said with the expected extra budget surplus, this year’s and next year’s budgets will have three main aspects; spending, a tax package and setting finance aside.
He said the priority will be middle income families and earners who he believes pay too much tax. He also said there will be a welfare and pension package which will hopefully be similar to that announced in 2022.
There was much speculation about a new 30% tax band ahead of Budget 2023 in September, with some now calling for it to be brought in later this year.
Minister Simon Coveney was recently questioned about the possibility of this new rate, he said it will be a topic of debate in the build-up to this year’s budget.
In last year’s budget, there was a big focus on widening tax bands in order to try to give middle income earners in the country a break, he said.
“These are the people who are paying for everything through their taxes and who are finding it difficult to meet their bills because of cost-of-living increases. The Government thinks we should continue that trajectory and that we should give people more of their income to take home at the end of each week.
“Whether we do that through a more radical system of a 30% tax rate or through a more managed approach of widening tax bands remains to be seen. We want to ultimately move towards the target that Fine Gael has set of allowing people to earn €50,000 per year before they move into the top rate of tax, which I strongly agree with,” said Coveney.
“Having looked at international examples, Ireland is an outlier in the number of people who pay at the highest rate of tax. This is something that will be debated in the coming months,” added Coveney.
Fine Gael sources have indicated that they are not wedded to a new 30% tax band – if changes in tax bands move earners to the €50,000 mark before the higher rate of tax kicks in, that satisfies their wishes.
“Fine Gael want middle income people to pay less income tax – it is one of the reasons why Fine Gael agreed to take part in this government,” said one source.
“We’ve got to €40,000, we want to get it higher and move towards €50,000 over the next budgets,” they said, adding Fine Gael is “not hung up” on how that is achieved.
A budget surplus of €16.2 billion is predicted for next year, with the Department of Finance figures showing it will reach more than €20 billion in just three years.
However, Varadkar said this week that there will come a time when revenues fall off and nobody in the country wants to return to the position of cutting pay, services and investment as happened with the last recession.
“We should never forget that our national debt dwarfs any surplus and interest rates on government debt are rising,” he said.
Fine Gael members will set out their views on the Budget at a future meeting in June.
“The programme for government commits that income tax credits and bands will be indexed linked to increases in earnings,” a spokesperson for Finance Minister Michael McGrath told The Journal.
The Minister for Finance recently concluded a public consultation on the Personal Tax system and the consideration of this will inform proposals he will present as part of the Budget 2024 process.
“Minister McGrath is committed to a progressive income tax system and ensuring the benefits of economic growth are shared widely in society.”
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