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budget 2023

Government teases new tax bracket for middle-income earners

Fine Gael Ministers have shown support for a proposed 30% tax band.

PUBLIC EXPENDITURE MINISTER Michael McGrath has signalled that the Government are planning on introducing a new tax bracket in October’s budget, as he refuted calls for an emergency budget.

Several Fine Gael Ministers have shown support for a proposed 30% income tax band, including Tánaiste Leo Varadkar and Social Protection Minister Heather Humphreys.

Speaking during Leaders’ Questions in the Dáil, McGrath said that there would be a package of measures within Budget 2023 that would see changes to income tax brackets so people don’t climb into higher tax brackets.

McGrath also said that there would be a “significant” welfare package within the next budget.

“There will be a need for a significant welfare package as well as providing a reduction in tax by way of ensuring that people do not continue to climb up into the higher rate of tax as they receive an income increase.

“What we don’t want is a situation where the constituent that you highlighted there ends up getting a pay rise or does some overtime and then he’s paying half of that in tax because he’s crept into the marginal rate of income tax.

“If you have a static tax system at a time of rising incomes, that is equivalent to an increase in tax,” said McGrath, responding to Independent TD Peter Fitzpatrick.

McGrath was also questioned by Sinn Féin leader Mary Lou McDonald around the rising cost of living, calling for the Government to implement an emergency budget before the Dáil recess.

McGrath did hit back at McDonald over the calls for an emergency budget, saying that the Government was able to take action earlier this year as it had not followed Sinn Féin’s calls for €3.5 billion more spending in Budget 2022.

I’m sure the irony is not lost on you that if we had followed your approach, if we had taken your advice to spend €3.5 billion more in the last budget, if we had taken your advice to do more every time we made an intervention in the last number of months, we wouldn’t have the headroom and the capacity that you know call on us to use in order to do more.

McDonald dismissed McGrath’s comments, saying that he was “bragging” on the current state of the economy and that parents who were preparing for their children to go back to school were facing a “household crisis” due to rising prices.

“As we meet today, in households across the country, getting a child back to school in September is now a household crisis,” said McDonald.

“School booklists started to arrive today into many households and those families, who work very, very hard, for them the outlook is not relatively positive.

“In fact, for many of them, it’s terrifying.”

It comes as Ireland was shown to have the second-most expensive food in the Eurozone, detailed in a new report from the Central Statistics Office.

Last year, food prices in Ireland were 17% above the EU27 average, making them the second most expensive in the Eurozone, and third most expensive in the Europe Union.

Prices for the various types of foods in Ireland were all higher than the EU average, except for fish which was 3% lower.

Irish prices for milk, cheese and eggs were 25% higher than the EU average, while oils and fats were 22% higher, and breads and cereals were 20% higher.

Ireland and Malta were jointly the second most expensive countries in the EU for non-alcoholic beverages.

An international survey has also listed Dublin as being the 49th most expensive city in the world.

The Society of St Vincent de Paul (SVP) said that Ireland could see “a deepening of poverty and households being pushed into poverty for the first time” if the Government does not take the correct decisions to address the ongoing crisis.

SVP’s head of social justice Dr Tricia Keilthy said that many households on low incomes are in debt and already cutting back on essentials.

“There’s some measures that may not be the best use of resources, for example, cutting VAT. Tax cuts for higher income earners are not the best use of resources,” she said.

“We need to ensure that those on the low incomes and on middle incomes [who are] at risk of falling into poverty are protected during this inflationary crisis.”

The charity has instead called for measures including an increase of €20 in core social welfare payments, an increase and expansion of the Fuel Allowance payment to low-income working families and help to end so-called “voluntary” contributions to schools.

Additional reporting by Stephen McDermott and Press Association.

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