FIANNA FÁIL IS going to battle with Fine Gael over cuts to the Universal Social Charge (USC) in the Budget.
Fianna Fáil is adamant that the confidence and supply agreement with Fine Gael agrees to steadily reduce the USC for low and middle-income earners.
However, over the summer months, Fine Gael has discussed increasing the entry point for the higher rate of tax.
Last week, Finance Minister Paschal Donohoe said he plans to amalgamate PRSI and USC over the next few budgets.
Fine Gael’s plans
He also gave specific details about increasing the standard rate cut-off point for income tax.
“The top 10% of income earners pay 24% of total income tax and USC, the top 6% pay 49% of total income tax and USC, and the top 26% pay 83% of all income tax and USC collected in our country. It is absolutely right that those who earn more pay more and those who earn less pay less.
“But a taxation system that takes more than 50% of the income of someone just above the average industrial wage is not fair, it is not efficient and it is not sustainable. I want to gradually increase the standard rate cut-off point for income tax. We will prioritise band widening over rate reductions. I believe the issues relating to the standard cut-off point and levels of USC for those with low or middle incomes, are areas we have to make steady progress on,” said Donohoe earlier this month.
‘Mixed messages’
Ahead of the party’s think-in in Longford today, Fianna Fáil’s party leader Micheál Martin said the government have been giving “mixed messages” about tax cuts over the summer.
He said his party would be monitoring any fluctuations from Fine Gael in the agreement which is propping up the government.
“There have been promises of tax cuts. There have been promises of pension increases. One minister says it’ll be a fiver, another minister says something else. There have been all sorts of promises and to be honest it’s a bit incoherent. It’s confusing to the general public because an awful lot was happening in July/August in terms of the budget. As you get down to the wire the room for manoeuvre is becoming more narrow. Public services need improvement and delivery,” said Martin.
“We want to remain faithful to the confidence and supply arrangement,” he said, adding:
On the tax front it’s very clear in the confidence and supply that both parties are signed up for a reduction in the universal social charge.
The most effective one would be reducing the 5% to 4.5%. That would take in 1.3 million people. It would be more effective than what Fine Gael are proposing which will take in far fewer people on higher incomes.
We would benefit people on a wider income, particularly low to middle incomes. Anything up to €70,000 would benefit from our proposal. We believe that subject to the available funding that’s our priority. That would be the most effective way of dealing with tax.
A deal’s a deal says Fianna Fáil
He said if Fine Gael want to introduce tax reductions the party will have adhere to what’s in the confidence and supply agreement.
The agreement does specify: “The government must introduce reductions in the Universal Social Charge on a fair basis with an emphasis on low and middle income earners.”
“It’s very clear from the outset that what underpins our support for the budget is the confidence and supply,” he said, adding that the document is clear cut about what both parties signed up to in order to get a government formed.
The confidence and supply is very clear and both parties signed up. I’ve been getting mixed signals from Fine Gael over the summer because at certain times they are talking about their long-term plans. They acknowledged the existing of the confidence and supply in some of their comments during the summer.
But we’re very clearly focused on what we’ve signed up to in the confidence and supply agreement. This will be the second budget of that confidence and supply and we believe the commitment by both parties should be respected.
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