Tax-free bonuses up to €1,000 on table for Budget

Tánaiste Leo Varadkar. Photo: Damien Storan

Gabija Gataveckaite and Senan Molony

The Government is looking at increasing €500 tax-free bonuses for employees in the private sector to €1,000 as part of Budget 2023 preparations.

Tánaiste Leo Varadkar said pension, social welfare and tax packages in the Budget will be bigger than “previous years” due to record levels of employment and “healthy” tax receipts.

Mr Varadkar said there is more room for “manoeuvre” during this Budget.

“We have more room to manoeuvre for the Budget this autumn than we would have had in any year in recent years and that’s driven by the fact that tax receipts are very healthy, the record levels of employment in the economy and the trade figures than they ever were before,” he said.

“Pension and welfare increases will have to be bigger than they were in previous years because the cost of living is rising than previous years.

“Because we’ve made agreement as a Government to index tax bands and credits, the tax package will be bigger than it was in previous years.”

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He said it is “unfair” that frontline workers are receiving €1,000 tax-free bonuses but the limit on tax-free vouchers remains at €500 for workers in the private sector.

“That is unfair in my view. [Minister for finance] Paschal [Donohoe] is doing some work on that. So if people are getting end of year bonuses from a private sector employer, they can receive €1,000 instead of €500 tax free,” he said.

Mr Varadkar said he doesn’t want to see pay increases more than halved due to high rates of tax.

“We want to make sure that if people get a pay increase, they don’t find 52pc of that being lost to income tax, USC and PRSI.

“We believe it would be safe to inject some money into the economy on budget day to help to compensate people for the high cost of living.”

He was speaking as Minister for Further Education Simon Harris announced increases to limits of money students can earn during the summer months to still be eligible for the SUSI student grant.

The Taoiseach said renters will also be included in the Budget, despite being left out last year.

“Renters will be considered obviously,” he said.

Ministers for Finance Mr Donohoe and Michael McGrath met the Taoiseach, Tánaiste and Green Party leader Eamon Ryan met last night to discuss the summer economic statement.

This will be published at the end of the month and set the “parameters” for the Budget.

Mr Varadkar said indications show that Exchequer Returns are “very strong” due to income tax rising as nearly full employment.

However speaking separately in the Dáil the Taoiseach poured cold water on emergency cost-of-living measures, pointing instead to Budget Day.

He said that giving cost-of-living reliefs in a package next week would only result in further public demands "before a month is out”.

“It seems to me that every month in this crisis, and it’s very serious, people want an extra €1bn,” Micheál Martin said.

“I’ve no doubt that if something was announced next week, before a month is out people will be looking for another package – and that’s the nature of it.” The Government wanted to alleviate the pressures, but to do so in a comprehensive way, he said.

Mr Martin said he fully accepted the pressures on people, yet €2.4bn in specific measures had been brought in as special measures since the last Budget.

But two Opposition parties insisted that an emergency Budget is needed now – after the Government signalled nothing new for four months.

Sinn Féin leader Mary Lou McDonald warned that people could not wait until the Budget in October.

“The Government cannot just pack up for the summer and leave workers and families in the lurch,” she said, saying people were being asked to wait for six months.

“We’re asking nobody to wait six months. But what are saying is that we can’t chase inflation,” Mr Martin said. Doing so had prolonged a recession in the 1970s for a decade, with second and third waves of inflation. “We have to avoid stagnation in itself.”

But he said he was worried about the winter period, with Putin of Russia trying to exact as much leverage as possible, and only this week cutting gas supplies to Germany.

The Budget would have some measures “applicable from Day One” he said, with a comprehensive cost of living package for the time ahead.

Sinn Féin had been asking the Government to chase inflation from the beginning, Mr Martin said.

“Protecting the economy is protecting our people,” he added.

Catherine Murphy, co-leader of the Social Democrats, said she struggled to understand why the Taoiseach was refusing to alleviate the pressure at this stage. Tea and sympathy would not pay anybody’s bills, she said.

“Four months (to the October Budget) feels like a lifetime,” she added. Many were already in debt, and energy and fuel costs were rocketing. Some 30pc were in fuel poverty, and those on low to middle income were suffering most. “Those people cannot hang on. They are suffering at the moment.”

The Social Democrats had also proposed an Emergency Budget, she said, and wanted an extra €10 on core social welfare payments, with a €150 million hardship fund.

Mr Martin said the Budget would set out spending and revenue targets for the next twelve months.

But Sinn Féin leader Mary Lou McDonald was scornful.

She spoke of a mother who now goes to a food bank twice a week “and it's packed to the rafters.”

Thousands of people took to the streets on Saturday last because they are pushed out to the brink by an ever-worsening cost of living crisis, she said.

“Despite the hardship that they face, they see the Government refusing to take action that will make a difference.

“Households are caught in the eye of a perfect storm of soaring prices. They're ripped off by extortionate rents and mortgage repayments, ripped off by big energy bills ripped off at the pumps for petrol and diesel, and ripped off by sharp increases in the cost of groceries.”

They had said at the weekend that they were at breaking point, she said. “They can't wait until October for the Budget, and then wait again until January for measures or relief to kick in.

“People are suffering now. They're being pushed to the edge now, and they need the Government to act now -- today.

“An emergency budget is needed because people face a disaster as they struggle to afford the basics.”