Friday 23 February 2018

Low and middle income earners will receive a tax boost in Budget 2018 - Finance Minister

Finance Minister Paschal Donohoe. Photo: Tom Burke
Finance Minister Paschal Donohoe. Photo: Tom Burke
Ralph Riegel

Ralph Riegel

Low and middle income earners will receive a tax boost in Budget 2018 which will be delivered through tax band changes rather than rate cuts, Finance Minister Paschal Donohoe confirmed.

He also revealed that the Universal Social Charge (USC) will be amalgamated with PRSI to deliver enhanced social services.

The Dublin TD said Budget 2018 next month will focus on tackling the unfairness of how some Irish workers earning just above the average industrial wage pay almost 50pc in overall taxation - and with addressing the twin housing and homelessness problems in Ireland.

Mr Donohoe, speaking in Wexford at the Kennedy Summer School, warned that he will attempt to achieve steady, careful progress with the budget rather than "shock and awe."

"There are real lives, real people, real hope and real certainty - and real suffering and real anxiety," he said.

"We want to find a real way to deal with the suffering and the anxiety that people in our society are struggling to deal with."

Mr Donohoe said Ireland will, for the first time in more than a decade, boast a balanced budget whereby income will cover planned expenditure.

"Our system, due to choices that have been made, has delivered a tax code that is hugely progressive. Our tax and welfare systems delivers one of the greatest redistribution of income in any country in the OECD," he said.

"The top 10pc of income earners pay 24pc of total income tax and USC, the top 6pc pay 49pc of total income tax and USC - and the top 26pc pay 83pc of all income tax and USC collected in our country."

"It is absolutely right that those who earn more pay more and those who earn less pay less."

"But a taxation system that takes more than 50pc of the income of someone just above the average industrial wage is not fair, it is not efficient and it is not sustainable."

Mr Donohoe said the next budget will attempt to tackle this issue while protecting Ireland's future economic development.

"What I will not do something today that has to be undone tomorrow."

 "We had policies of economic shock and awe - the awe of a significant tax cut followed by the shock of a penal tax hike a few years later."

 "The ebb and flow of the economic tide cannot be completely stopped. Steady progress is the best and safest course."

"Changes will be incremental, sustainable but also ambitious in terms of the journey we want to take our country on."

Mr Donohoe said he will opt for tax band changes rather that simple rate cuts.

"I want to gradually increase the standard rate cut-off point (for income tax.) We will prioritise band widening over rate reductions."

The Dublin TD said this will primarily benefit low and middle-income groups.

"We will (also) continue to recognise the contribution of the self-employed. Over time we will also amalgamate the USC and PRSI codes."

"This will support the improvement of our social support system."

"Let me be crystal clear - this is a journey, it will take time. What we cannot do is take one step forward and then many step backwards in future years."

"This is why I will very carefully be improving spending in areas that are improvement such as health and housing."

"But any issues facing Ireland will not be solved in a single budget."

Mr Donohoe said Ireland will also roll out a ten year capital spending blueprint - and will prioritise tackling housing shortages and homelessness.

"These are pressing examples of what we have to respond to."

"But Ireland must balance our books to keep our country and our people secure in a risky world."

"It means paying our way and eliminating the need for our country to borrow."

"The stronger our budgetary foundations the better we will be able to respond to those risks."

 "Ireland will achieve a broadly balanced budget - this means that the money we take in will be equal to the money we pay out."

 "I will have to make choices - there are many things I want to do but I have to make choices about what we can actually do in this budget."

 "We need to use our recovery obtained at great cost by our citizens to invest in the supports and opportunities for all."

"This means investing your money carefully and with continued reform and care - to make sure we deliver the right projects and to continue to improve our services."

 "It means delivering and making more progress on the vital infrastructure and in healthcare, housing policy and tackling homelessness."

Mr Donohoe warned he will not tolerate any repeat of past mistakes where there were "unsustainable and unaffordable tax give aways."

 "I can make no taxation decision independent of what is already happening in our economy - it has to be affordable not only now but in the future."

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