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Third income tax rate of 30pc on the table for Budget to ease pressure on families


Finance Minister Paschal Donohoe is said to be examining whether the new rate could be introduced. Photo: Damien Storan

Finance Minister Paschal Donohoe is said to be examining whether the new rate could be introduced. Photo: Damien Storan

Finance Minister Paschal Donohoe is said to be examining whether the new rate could be introduced. Photo: Damien Storan

A third rate of income tax of 30pc is still being considered in Budget negotiations. Tánaiste Leo Varadkar’s proposal for the new rate is being examined by the Department of Finance and will appear in soon to be published tax strategy papers.

The annual review of potential tax measures is published in advance of the Budget and gives ministers options on the cost of increases or reducing taxes.

Mr Varadkar asked Finance Minister Paschal Donohoe to examine whether a new rate could be introduced. Mr Donohoe has not published any details of the review of the rate which would be aimed at reducing tax for middle income earners.

“It’s definitely still under consideration but it’s not definitely being introduced in the Budget,” a Fine Gael source said.

Mr Varadkar first suggested the introduction of a 30pc tax band in a speech to the Institute of International and European Affairs in March.

“We set aside about €500m in each Budget to reduce the income tax burden, particularly for middle-income people, because people in Ireland pay that highest rate of tax on very modest incomes,” Mr Varadkar said at the time.

Meanwhile, Taoiseach Micheál Martin said families will see near-immediate benefits from a special cost-of-­living package to be introduced in September.

He announced that a package to alleviate financial pressures on families will be introduced in parallel with the Budget next month.

The Taoiseach said this week’s Exchequer figures showed a €5bn surplus, which he described as good news for the country as it gives the Government an opportunity to tackle “pressure on families”.

“It is good news that revenues have remained strong, notwithstanding challenges in terms of the cost of living overall internationally,” Micheál Martin said. “There are key sectors of the economy still doing very well, foreign direct investment and so forth, increasing revenues.

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“Buoyant revenue figures will give us an opportunity in the Budget, and the cost of living package in September, to take pressure off people.”

Speaking in Dún Chaoin at the Blasket Island Centre in West Kerry, Mr Martin said the Government intends to bring in a Budget with a “cost focus in terms of tax relief”.

“Parallel with [the Budget], there is a separate cost-of-living package, elements of which will apply this year, and people will feel the benefits of that package before the end of this year and, in some cases, immediately, to alleviate the pressures that are undoubtedly on many households across the country because of the energy crisis,” he said.

Mr Martin said the energy crisis has come about due to the war in Ukraine and “Russia’s weaponisation of energy, food and migration”.

The Government is also considering the possibility of a windfall tax on energy companies’ high profits.

“The Government will consider a range of issues and will give examination to the issue of windfall tax,” he said.

“We do want significant investment in renewables into the future but, that said, I think there are significant profits being made all round, and we will examine that in the context of the Budget”.

He said the Government already takes a dividend from state companies like the ESB.

A range of one-off measures to address the cost-of-living crisis are under consideration as part of budget negotiations.

Another electricity bill credit is expected after every household in the country was given €200 earlier this year.

There will also be an extension and possibly a doubling of fuel allowance payments for people struggling with their heating bills.

The one-off measures will be announced on Budget Day, September 27, and unlike other policies, will come into effect immediately rather than in the new year.

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