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Government called on to clarify Budget plans for income tax, social welfare

Michael McGrath TD says that the latest updates to Ireland’s bailout terms contradict pledges in the Programme for Government.

Image: Niall Carson/PA Wire

THE GOVERNMENT IS being urged to clarify its position on income tax increases and social welfare rate cuts in the coming budget following the publication of details of the latest updates to Ireland’s Memorandum of Understanding with the Troika.

The latest edition of the memorandum, which outlines the terms and conditions of Ireland’s loan agreement with the European Commission, ECB and IMF, includes a commitment from the Irish government to make €2.25 billion in spending cuts.

Measures to make those cuts include cuts on social spending, broadening current income tax measures and introducing a value-based property tax.

Fianna Fáil finance spokesperson Michael McGrath TD today called on the government to clarify the commitments outlined in the memorandum given the coalition’s pledge to maintain income tax rates and social welfare rates in the Programme for Government.

Concerning income tax, the programme says that the government will:

Maintain the current rates of income tax together with bands and credits. We will not increase the top marginal rates of taxes on income. We will reduce, cap or abolish property tax reliefs and other tax shelters which benefit very high income earners. We will also ensure the implementation of a minimum effective tax rate of 30% for very high earners.

McGrath says that the government “now needs to clarify whether the promise made to voters on income tax still stands”.

“In recent days, there have been suggestions that the government will look to increase PRSI in the budget so as to avoid income tax increases,” he said.

“Any increase in PRSI contributions from employees would have the same effect as income tax hikes on workers’ pay packets. Such a sly move by the government would be seen by voters for what it is – an increase in income tax through the back door – and would only serve to increase the sense of betrayal felt by voters towards this government.”

The Fianna Fáil TD added that many families will be alarmed at suggestions of income tax increases or social welfare rate cuts and said that the government “should put any speculation on the issue to rest now” and allow consumers “to plan their affairs will a little more certainty about their financial position in 2013″.

Read: 8 things to know about Ireland’s latest EU-IMF documents >

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