Leo Varadkar has defended Fine Gael's promise of up to €3bn in income tax cuts amid concern that volatile corporation tax (CT) receipts were used to plug a massive hole in the health budget.
Fine Gael has pledged five years of income tax cuts by increasing the point at which people pay the higher rate of tax. The Taoiseach defended the plan when asked if reducing taxes while allowing CT to pick up the slack for Government spending sent out the wrong message.
He pointed to last week's announcement that a budget surplus had been recorded a year ahead of schedule. He said he recognised the "real vulnerability" that a lot of CT comes from a small number of companies and if their profits fell the tax take for the Exchequer would too.
Mr Varadkar said that was why the Government had prudence measures in the budget - a Rainy Day fund and a projection that the CT receipts will fall this year. He said it would therefore be a "pleasant surprise" if CT receipts were at the same level in 2019. In relation to Fine Gael's tax-cut promise, the income tax take is rising by around €1.2bn a year because more people are working, they're doing longer hours and being paid more.
"My proposal is to give about half of that back in tax cuts. And I think that's only fair," he said.
He said the overall income tax yield will still rise over the plan. "If we don't give it back as people's incomes rise, more and more people will end up paying a higher rate of income tax and I don't want that to happen," he said.