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Leo says he wants to cut income tax, with Fianna Fáil's help

Varadkar says there may be ‘hidden fiscal space’ he can use.

Leo Varadkar and Paschal Donohoe arriving at the Government’s National Economic Dialogue in Dublin Castle.
Leo Varadkar and Paschal Donohoe arriving at the Government’s National Economic Dialogue in Dublin Castle.
Image: Leah Farrell

TAOISEACH LEO VARADKAR has said he wants to cut income tax in October’s Budget.

Speaking at the Government’s National Economic Dialogue in Dublin Castle, he said he was “determined” to find the resources for income tax cuts, and in order to do so may include increasing other taxes.

Varadkar said there was “hidden fiscal space” where funds could be freed up by possibly reallocating money away from programmes that are not delivering.

“We have in this year’s Budget voted spending of €53 billion. Are we sure they all represent best use of resources – if 1% of this money was changed we would have €530m extra. This is the hidden fiscal space and we need to examine this as the cost of doing nothing is too great,” the Taoiseach stated, according to RTÉ.

Fianna Fáil’s help

During Leaders’ Questions, Varadkar said he would need Fianna Fáil’s assistance to bring about tax cuts.

“The government reduced personal taxation and the universal social charge last year and will continue to do so, hopefully with the support of Fianna Fáil in the next budget, and the years ahead,” he said.

It stipulates in the confidence and supply deal between Fine Gael and Fianna Fáil that the government must split available resources on a two-thirds to one-third basis in favour of public spending over tax cuts.

Fine Gael needs Fianna Fáil to support the Budget in order for it to pass.

Middle-income earners 

At an event earlier this week, Minister for Finance Paschal Donohoe said he wanted to raise the entry point for the marginal rate of tax. He said it is “unfair” and “unsustainable” for middle-income earners.

1881 National Economic Dialogue_90516218 Government’s National Economic Dialogue in Dublin Castle today. Source: Leah Farrell

Donohoe said it was not “sustainable in a modern economy” for someone on a low-to-middle income to lose half of their extra income in tax.

During the Fine Gael leadership contest, Varadkar said he was in favour of merging the USC and PRSI into a single social insurance payment, which would bring down the amount of tax that the average worker takes home.

At the time he said “nobody should pay more than 50% in income tax and social insurance on any euro they earn”.

It is understood a spending review will be published by the Department of Public Expenditure and Reform before the summer recess.

Read: ‘Leo models himself on Macron and Trudeau, but he’s not living up to them when it comes to gender balance’>

Read: Taoiseach told Defence Forces families can’t afford to put food on the table>

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