LAST UPDATE | 10 Aug 2022

A NEW 30% income tax band is under consideration, Tánaiste Leo Varadkar has said, which would benefit around a million workers.

Varadkar said that the 30% rate was one of a number of options outlined in the Tax Strategy Group papers, which were published today, but he stressed that no decision has been made yet.

The papers outline different options for the government to consider ahead of Budget day at the end of next month.

They indicate that a third income tax band could see up to a million taxpayers take home an extra €500 or €1,000 a year.

Middle and high income earners would see “a direct increase in their net income” if such a measure was introduced, while low and modest income earners “would not directly benefit from this proposal”, the group said.

It also said that it is generally considered that the entry point for the higher rate of income tax in Ireland “is low by international standards”.

Speaking to reporters in Balbriggan in Dublin, Varadkar said the Budget will contain a “substantial income tax package” which will benefit workers on low, middle and higher incomes.

There will be “a particular emphasis on middle-income workers,” he said.

“It’s important to emphasise that the government hasn’t decided to do anything at all contained in the tax strategy papers. They are just options

What is absolutely agreed is the principle that we will see a very substantial income tax reduction package in the budget. Almost all workers will benefit from that

“It’s one of the ways – not the only way – but one of the ways that we can help people with the rising cost of living, by making sure that they can keep more of their hard earned money and making sure the work pays better.”

If adding a third tax band, the group outlines two options: income taxed at 30% for those earning €36,800-41,800, which would cost the Exchequer 525 million euro a year.

The second option would be to set the 30% tax rate at incomes between €36,800-46,800, which would cost €945 million for a full year.

Varadkar was in Balbriggan for the launch of a drone delivery service.

In June, Social Protection Minister Heather Humphreys threw her support behind a new middle rate tax band could help cushion the blow of inflation on the squeezed middle.

Varadkar has previously suggested that a third 30% rate of income tax could help middle-income earners and has asked Finance Minister Paschal Donohoe examine whether it could be introduced.

Ahead of the Budget, opposition parties have been quick to point out that much of the measures introduced to help people with the rising cost of living have been gobbled up already with spiralling inflation.

One way of attempting to put more money in people’s pockets is through increasing State supports and reducing the cost of services, which is understood to be the main focus for Budget 2023 this October.

As reported by The Journal in April, one of the main focuses for the Government is childcare, with plans to increase childcare subsidies significantly in order to reduce the cost of childcare for parents.