Budget showdown as parties diverge on tax rates

The 26-County Taoiseach Enda Kenny has promised that next week’s budget will see the first step in reducing the top rate of tax for the state’s highest earners, but that any move to abolish the new charges and taxes on the general public would amount to “economic and social madness”.

He said the current top rate of tax of 41% “undermines the incentive to work, to do overtime, to start a business”.

Social campaigners have expressed outrage at the prospect that top earners would be favoured by the budget. Fr Peter McVerry accused Kenny of planning a “conjuring trick” to convince the less-well-off that they were also going to benefit.

He said “whatever few bob” are going to them was going to be taken back in water charges.

“I’m absolutely dismayed at idea that the tax cuts are going to be at the top rate of tax. That horrifies me. I really can’t express how outraged I would be at that,” he said.

“Because basically it’s not helping people at the lower end of the wage scale. It is simply helping those who are already much better off.”

The Think-tank for Action on Social Change (Tasc) has called on the coalition government to cut VAT [sales tax] rather than income tax.

It said cutting VAT by 1 per cent would help to kick-start the economy by boosting domestic consumption and the spending power of lower income households in particular.

“People still have to pay for school books in Ireland, which you don’t pay for in most countries, they’ll still have to pay for the doctor or prescription charges and this means that the cost of living is higher and people feel they can’t give any more in taxes,” said Cormac Staunton, policy analyst with Tasc.

They also proposed the introduction of a 48% tax rate on incomes above a hundred thousand euro -- an idea exactly mirrored by Sinn Fein’s budget submission for this year.

In their annual ‘alternative budget’, which they said had been fully costed by Department of Finance officials, Sinn Fein said the revenue yielded by a new, third rate of tax could be used to eliminate water and property taxes in a stroke.

The party also proposed that those on less than 17,542 euro would be exempt from the Universal Social Charge. Furthermore, the party has pledged to restore the maximum rate of 188 euro per week for jobseekers over two years.

Sinn Fein finance spokesman Pearse Doherty (pictured) pointed out that third rates or high rates of tax for the wealthier existed in many other EU states. Belgium, Denmark, Holland, Germany and Finland and France all had higher rates than Ireland, he said.

“In Britain, there is a 45% rate for earners above 150,000 euro,” he said.

Sinn Fein’s ‘alternative budget’ also allows for the possibility of an end to prescription charges, increases in the family income supplement, the respite care grant, the fuel allowance, farmer assistance payments and increasing the number of resource teachers.

But Kenny lashed out at the plans, and claimed the proposals would add up to a top rate of tax of 73%. Doherty said the Taoiseach’s analysis of his party’s alternative budget had no basis in reality.

“Sinn Fein has consistently called for an extra 7% only on income over 100,000 euro. This would increase the tax applied to income over 100,000 euro from 52% to 59% yet Enda Kenny has somehow come up with a figure of 73%,” he said. “This is nonsense.

“Each year our costed budget shows how the deficit target can be met. If the Taoiseach took on board our options water and family home taxes could have been avoided.

“What we are seeing here is an attempt to pretend there no choices in politics. The Taoiseach is obviously under pressure to defend his choices faced with Sinn Fein’s alternative.”

Urgent Appeal