THE TAOISEACH HAS said that the scope for any income tax reduction will not be known until much closer to the Budget next October.

The government expects to have to implement an overall adjustment of €2 billion in expenditure cuts and tax rises in Budget 2015, but if the economy does better than forecast there may be scope for an easing off in austerity measures.

Enda Kenny has committed to “no income tax increases in the next budget” in line with the programme for government and said that any income tax reductions would be targeted at middle-income families, saying that would be a “priority”.

“The scope for any income tax reductions, which I’ve seen commented on, will not be known until much closer to the Budget and they depend upon growth rates and job opportunities,” he said.

“But whatever resources are available, the priority will be to reduce the very high tax rates that are faced by families on middle incomes. So whenever that flexibility comes that will be a priority.”

Kenny has also stressed the need to reform the tax and welfare system to ensure that “work pays” citing “welfare traps” such as rent supplement which a person can lose entirely as soon as they gain employment.

“We need a new transition system to phase that out over a period,” he said.

A report from the Department of Social Protection’s Advisory Group on Tax and Social Welfare is expected next April and will focus on what the Taoiseach said are “barriers that prevent part-time workers from going into full-time employment”.

This will include welfare payments such as Family Income Supplement (FIS), rent supplement, and child income supports.

In February, a long-awaited report on child benefit from the same group, chaired by Ita Mangan, recommended a two-tier system where families are means-tested for the payment, but this has been long-fingered by the coalition.

Read: How does the government spend your taxes? This TD can tell you