Monday 24 April 2017

'I'll cut tax on middle incomes' - Varadkar turns focus to tax cuts

Enda Kenny and his wife Fionnuala are welcomed by the prefect of the papal household Georg Gaenswein as they arrive for an audience with Pope Francis with other European leaders in the Vatican Picture: AFP/Getty
Enda Kenny and his wife Fionnuala are welcomed by the prefect of the papal household Georg Gaenswein as they arrive for an audience with Pope Francis with other European leaders in the Vatican Picture: AFP/Getty
Niall O'Connor

Niall O'Connor

Enda Kenny's much-anticipated departure as Taoiseach in a few months' time will kick off more than just a leadership contest.

His decision to finally step aside, probably in June, will set in motion a period of soul searching within the Fine Gael party.

It's a process that many members feel is long overdue.

Mr Kenny's legacy will undoubtedly be assessed in the context of the undeniable leadership he has shown in rebuilding an economy that was on its knees just a few years ago.

But the treatment of middle-income earners by the Fine Gael-led government will be included among Mr Kenny's failures.

The squeezed middle, as they are often described, do not believe their struggles have been recognised to any real degree.

They feel neglected, even forgotten about. These families want a break. Today, the frontrunner to succeed Mr Kenny as Taoiseach and Fine Gael leader makes a direct pitch to the country's coping classes.

Leo Varadkar acknowledges that the level of income tax they pay is unjust and says it is driving our qualified professionals overseas.

"Taxes should be low, simple and fair," he writes. "High tax rates make it harder to attract skilled, qualified and talented people home from London and from other countries, and it is one of the push factors that causes our homegrown doctors, IT professionals and others to take opportunities elsewhere."

While there is an element of vagueness to Mr Varadkar's tax vision, his focus falls on three key areas.

Firstly, Mr Varadkar insists the marginal tax rate needs to brought below 50pc. Many workers already pay a punitive rate as high as 52pc, once Universal Social Charge and PRSI are factored in.

For the self-employed, the marginal rate can be as high as 55pc. "The Government should never take more than 50pc of any euro you earn," Mr Varadkar insists.

The means by which Mr Varadkar intends to achieve this aim is two-fold. He wants to raise the entry point at which workers begin paying the higher tax rate of 40pc, which is currently set at €33,800.

This is the arguably the most straight forward option and is one that has the support of Fianna Fáil.

Mr Varadkar is also standing over his party's pledge to scrap USC, although he does not specify whether this will be achieved by 2021 as promised by Finance Minister Michael Noonan.

But while Mr Varadkar wants people to pay less via income tax, he believes that a fair compromise is that they pay more into so-called 'social insurance'.

This is undoubtedly the most contentious element of his plan.

The upside, he says, is that the insurance money paid by workers will be "ringfenced" to provide services such as medical expenses. But sceptics will undoubtedly see this as a tax under a different guise.

In making the argument for social insurance, Mr Varadkar takes a swipe at people who refuse to work.

"Too often, we have allowed Irish society to be divided into one group of people who pay for everything but get little in return due to means-tests, and another group who believe they should be entitled to everything for free and that someone else should pay for it," he said.

This will be music to ears of the middle classes but pitches Mr Varadkar firmly against left wing parties that are going from strength to strength.

Irish Independent

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