FINANCE MINISTER Michael Noonan has affirmed that there are no plans to increase income tax rates in the coming Budget – despite a Troika commitment to widen the personal income tax base.
Noonan has gone on the record to confirm that the pledge in the Programme for Government – in which the government pledged to maintain the current rates of income tax, income bands and tax credits – remained the policy of the Fine Gael-Labour coalition.
“There are no plans at this time to depart from this policy,” Noonan said.
The commitment – on the record of the Dáil – came after parliamentary questions from Fine Gael backbencher Terence Flanagan, who asked if the government planned to introduce a higher rate of income tax for high earners.
“In addition, we will not increase the top marginal rates of taxes on income,” Noonan affirmed in his written reply.
The minister said OECD research named Ireland as having one of the most progressive tax systems of any of its EU members.
“I should point out that the top marginal rate of taxation on income is now 52 per cent for PAYE workers and 55 per cent for the self-employed,” he said.
Noonan elaborated that the top 5 per cent of earners were set to pay 43 per cent of all income tax collected in 2012, while some 78 per cent of all workers – those earning under €50,000 a year – would contribute only a fifth of the tax take.
Though the commitment will be welcome news to PAYE workers ahead of the Budget, it may make the Budget arithmetic more difficult for the minister – as the most recent edition of the EU-IMF Memorandum of Understanding included “a broadening” of the income tax base as one of its revenue-raising measures.
The Budget, which is due in 45 days’ time, is due to include measures which will raise an extra €1.25 billion in taxes, as well as spending cuts worth €2.25 billion.
Other ways in which the government is due to increase revenues include the property tax, increases in excise and other indirect taxes, and a “restructuring of motor taxation”.
Aside from the broadening of income tax, it also committed to “a reduction in general tax expenditures” – a commitment had previously been interpreted as cuts to tax credits, or the introduction of narrower criteria under which a taxpayer could qualify for them.
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