Middle-income workers must benefit from tax cuts - Varadkar
Published 27/09/2016 | 02:30
Minister Leo Varadkar has said tax cuts in the Budget must benefit middle-income workers because they "pay the most tax".
With limited resources of around €300m available for tax cuts, the issue of who should benefit from cuts - particularly to the USC - is set to be the focus of tense negotiations.
Independent Alliance Minister Finian McGrath has said that his preference is for low- paid workers to benefit most.
Finance Minister Michael Noonan last night outlined the challenges facing him in Budget talks. He noted there are three Independent ministers as well as the demands of the Fine Gael and of Fianna Fáil which is facilitating the minority government. "There are a lot of views that have to be taken into account," he said. He said that "so far" there haven't been "dramatic" conflicting views, adding he's confident "we'll put a good Budget through".
Changes to USC is perhaps the area that presents the most potential for disagreement as talks intensify.
A 0.5pc cut across the rates affecting the broadest cohort of low- and middle-income workers would cost €330m - obliterating the expected fiscal space available to other tax measures.
Neither Social Protection Minister Mr Varadkar nor Independent Communications Minister Denis Naughten would say if they favoured using all of the available funds for a broad cut to the USC.
Mr Varadkar said his view is that any tax reduction has to benefit low-income workers "but also the middle class" because they "pay the most tax both in cash terms and percentage terms".
Mr Naughten said the Government have a "difficult balancing act" to perform but that "all working families, regardless of income, need a break" and he hopes an agreement can be reached to benefit as many as possible.
Asked if he would like to see room for other tax cuts as well as a cut to the USC, he said: "there are other issues there that need to be dealt with."
He said this included support for small businesses and - from his own department - measures to help people retrofit their homes for energy efficiency.
Separately, speaking at a jobs announcement in Limerick, Mr Noonan said he'll use the Budget to reiterate the Government's commitment to the 12.5pc corporate tax rate.
He also spoke of potential benefits from Brexit. He said there is "great interest" in the City of London in Ireland as an alternative location for the financial services industry.