independent

Monday 21 April 2014

Michael Noonan: 'We want tax cuts to create jobs, not win votes'

Finance Minister Michael Noonan. Photo: Frank McGrath
Finance Minister Michael Noonan

THE Government is looking at a possible income tax cut to make working more worthwhile and not to win over voters, Finance Minister Michael Noonan has told a panel discussion in Brussels.

And highlighting the extent of the problem still posed by unemployment, he suggested the levels of youth joblessness in Europe could help boost extremism as he shared a platform with finance ministers from crisis hit countries Spain and Portugal.

The conference, organised by the Organisation for Economic Cooperation and Development (OECD), focused on how to foster jobs and growth in the eurozone as recovery gradually takes hold in the 18-strong bloc.

The coalition has been building up expectations of an income tax cut in October's Budget 2015, with Taoiseach Enda Kenny saying it was a priority for government.

Mr Noonan said that the low threshold at which workers hit the higher rate of tax of 41pc was damaging to jobs.

''As a labour market initiative to make work more worthwhile, we're saying that as soon as we have resources, our first priority would be to widen the average rate band of income tax so that people can earn more before they hit the higher rates, so that people can do overtime before they hit the higher rates, so that people can take on extra work before they hit the higher rates,'' he said.

''It's not a promise to endear ourselves with the electorate. It's another instrument of labour market policy. I want to lay it out clearly and have the debate on it.''

Workers are hit with the marginal rate of tax on income above €32,800 and raising that threshold is likely to be the focus of any cut in personal tax in the Budget.

When asked if raising the possibility of tax cuts almost immediately after Ireland left the bailout suggested complacency on the part of the government, Mr Noonan replied: ''Politics is an art rather than a science.

''One of the the things we did successfully in Ireland was we brought the people with us. The Government would still have reasonable support and expectations of getting reelected."

The minister later said that he would widen the tax band as much as he could ''depending on resources''.

He said that so far in the year there has been no surge in taxation, pointing out there was no additional resources yet to play around with.

''It's very early and we'll see as the year goes by if various independent forecasters are correct and the economy is growing faster than the 2pc we built into the budget, that should give taxation buoyancy as well,'' he said.

It comes just days after Public Expenditure and Reform Minister Brendan Howlin said public spending hikes and tax cuts would be looked at, but the gains made to date would not be put at risk.

Mr Kenny said last week that he recognised the pressure people are under.

Meanwhile, OECD Secretary General Angel Gurria, who was also on the panel along with Eurogroup chair and Dutch Finance Minister Jeroen Dijsselbloem, said the legacy of the crisis had been brutal.

''People have become hardened, cynical, and it's so difficult for them to buy and take ownership of the policies that are being proposed,'' he said.

''And that's what makes it so difficult for the ministers, and the prime ministers and leaders to sell these things to the public. People are so resistant and they don't feel that we're doing things that matter to them, that we're solving their problems.''

Mr Noonan said youth unemployment levels across Europe ''puts the wind beneath the wings of every extremist in Europe''

The minister will take part in a meeting of European Finance Ministers tomorrow in Brussels for continued talks on banking union.

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