No income tax cuts for workers due to Brexit threat, warns Finance Minister Paschal Donohoe
INCOME tax cuts in next year’s budget have been ruled out by Finance Minister Paschal Donohoe.
In a break from tradition, Mr Donohoe has confirmed there will be no scope for changes to personal taxation a full month before Budget Day.
Ministers have agreed that the Budget will be prepared on the assumption that we are heading for a disorderly Brexit.
Across the board increases to pensions and other social welfare payments, as occurred in recent years, have also been ruled out.
Instead Mr Donohoe will look to make ‘targeted’ increases in areas affected by the fallout from Brexit.
"Given the uncertainty and lack of clarity regarding the timing and format that the UK's exit will take, preparing for a no-deal scenario is the most sensible approach," Mr Donohoe said.
The Government expects to have €2.8bn extra available next year on foot of a growing economy.
However, €2.1bn of this has already been pre-committed to expenditure measures including public sector pay increases.
As a result Mr Donohoe will have €700m for new tax initiatives and spending increases.
Speaking after a Cabinet meeting, he said the majority of it would be used to “support parts of the economy” most impacted by Brexit.
These are likely to include the agriculture and tourism sectors.
Mr Donohoe said there is “a case” for reducing income tax on middle income workers in order offset the impact of Brexit, but “I’m not going to do that”.
He said money would be needed to deal with potential growth in unemployment.
“A no-deal Brexit will have profound implications for Ireland on all levels. These include macroeconomic, trade and sectoral challenges, both immediately and in the longer term.
“A crucial policy response is to build up our capacity to respond to these challenges.
"This is why the Government is prioritising reducing public debt, establishing a Rainy Day Fund and avoiding pro-cyclical budgetary policies. While there are risks ahead there are also opportunities; our goal is to position our economy to minimise these risks and to maximise the opportunities that lie ahead,” the minister said.