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Debt and taxes: Here's what the parties want to do to people's tax burdens

It’s all about the money.

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THE ELECTION IS only days away and soon the focus will turn to government formation, at which time potential coalition partners will have to start talking.

This will likely involve parties having to compromise on some of their policies, but one of the areas where this may be difficult is in the fundamental area of tax.

In the final week of the campaign, Taoiseach Leo Varadkar has made a specific effort to focus on tax.

Most parties are pledging that most people will pay less in tax but what exactly is each party saying about personal taxes?

Here are some of the main pledges. 

Income tax

shutterstock_529488907 Source: Shutterstock

Fine Gael wants to raise the entry level of the higher rate of income tax, so that individuals only get taxed at the higher on income above €50,000. The party says it will do this over the next five years from the current entry point of €35,300.

In a video he tweeted on Monday, Varadkar said: “A single person earning as little as €36,000 or €37,000 is liable to pay the highest income tax rate and we want to change that.”

Fianna Fáil also wants to raise the entry level to the higher rate but its proposed change is smaller, raising the entry point to €38,300 for a single person and €76,600 for a married couple’s combined income.

In its manifesto, Sinn Féin says “only the top 3% of individual earners will see any increase in their net income tax” but the party does not detail specific changes to the standard income tax bands.

Sinn Féin says also says it will “taper out tax credits on individual incomes over €100,000 to €140,000″.

Fine Gael, Fianna Fáil, Sinn Féin and the Greens all make the same pledge to raise earned income tax credit for self-employed people by €1,650 to match it with the PAYE tax credit.

Labour says it will “widen income tax bands to prevent inflation” and will “withdraw income tax credits on high earners with incomes over €100,000″.

The Social Democrats want to ”increase the minimum effective tax rate of persons earning more than €400,000″.

USC

The Universal Social Charge was introduced in late 2010 as a levy taken from people’s wages to plug the gaping hole in the public’s finances.

Its introduction was to be temporary and the rate has reduced in recent years - but there was no change in the most recent budget.

The first rate of USC is 0.5% and only kicks in on someone’s income above €13,000, Fine Gael wants to raise this to €20,500 while Sinn Féin wants to increase this exemption to €30,000. 

People Before Profit says USC should not apply at all to incomes under €90,000 and that there should be “a high-income charge for those over it”.

The third rate of USC kicks on income between €20,484.01 to €70,044 and is charged at 4.5%, Fianna Fáil has said it will reduce this to 3.5%.  

Labour states that it “will not raise USC” while the Social Democrats make no reference to it in the party’s manifesto. 

‘Wealth tax’

Sinn Féin is promising to introduce a 5% high income levy on individual incomes above €140,000 and also wants “a wealth tax for the wealthiest 1% in the State”.

The party says this would apply “a rate of 1% on the portion of net wealth held over €1 million with a number of exemptions including farms”.

The Green Party also mentions a wealth tax in its manifesto, saying this would apply on individuals “holding assets over €10 million”. 

People Before Profit also wants similar and is pushing a new tax band for “single tax cases earning over €100,000″.

The Social Democrats does not necessarily suggest a new tax but says it would “increase the minimum effective tax rate of persons earning more than €400,000 per annum”.

Labour says it will progressively withdraw Income Tax credits on high earners with incomes over €100,000.

Carbon tax

shutterstock_1612884418 Source: Shutterstock

Carbon tax was increased in the last budget to reach €26 per tonne. For home-heating fuels, it will kick in from May 2020.

The aim of the tax is to reduce carbon emissions and encourage people to change their behaviour.

The Green Party is in favour of a gradual increase of carbon tax over 10 years to reach €100 per tonne, with the parting saying there should be a mechanism to return revenue from carbon tax back to citizens through social welfare and tax credits. A similar model was adopted in Canada last year

Fine Gael also says that carbon tax should be increased gradually but its policy is to increase it by €6 per tonne per year until 2030, bringing it to €80 per tonne. The party says it will “ring-fencing €6 billion” of the carbon tax collected in that period for climate action projects. 

Fianna Fáil makes the same pledge as Fine Gael on carbon tax, saying it is a “proven mechanism to change behaviour” and also promising to ring-fence the income.

Sinn Féin disagrees with the three above parties, pledging not to raise carbon tax at all. The party argues that it “is a regressive tax” and “will not make the state greener or cleaner”.

The ESRI has previously said that while carbon tax “could have adverse impacts on GDP, inequality and household income”, a system can be designed so that lower income households are actually better off.

The Social Democrats says that while it “supports the principle of a carbon tax” it must be designed “to incentivise people to change their behaviour”.

People Before Profit also suggests that carbon tax be removed, saying it should be “on the big polluters, not on ordinary people”.

Local Property Tax

The Local Property Tax (LPT) first came into effect in 2013 and is a tax paid based on the market value of a property. The rate paid is 0.18% on the value of a property and the valuation is based on valuations from 2013.

Properties worth more than €1 million are assessed on the actual value at 0.18% on the first €1 million and 0.25% on the portion above €1 million. 

Last year it was announced properties are to be revalued for the purposes of the tax on 1 November 2020.

In its manifesto, Sinn Féin says that it will abolish the LPT completely. The party estimates the cost to the exchequer of this move at €485 million per year.

The party, however, also plans as “second home charge at a rate of €400″ which it says will raise €104 million. 

Fine Gael says the LPT should be reformed so that local councillors have more discretion to change the rates in their own area. The party also says it will legislate so that “money raised locally is spent locally”.

Fianna Fáil says that the LPT system should be completely reformed so that the rate is set based on local CSO statistics and not the across the board rate of 0.18%. The party says it will ensure that homeowners will not face “significant increases”.

People Before Profit also wants to scrap the LPT on family homes and instead pledges to introduce a “millionaire’s tax” that taxes assets valued at more than €1 million at 2% each year.

Neither Labour nor the Social Democrats mentioned the LPT in their manifestos. 

Corporation tax

ireland-rejects-obama-criticisms Google's headquarters in Dublin. Source: PA Images

One of the only areas where all of the major parties agree is on corporation tax. All of the parties in the Dáil want the rate to remain at 12.5%.

Several parties, however, including sentences in their manifestos saying that efforts should be made to ensure companies pay at that rate. 

Labour also wants the rate to remain at 12.5% but says it should be lower for companies locating in disadvantaged regions of the country.

Sugar Tax

Some parties have also pledged to expand the sugar tax, which sees 30 cent per litre added onto sweetened drinks that have over 8g of sugar per 100ml.

Labour says it will extend it “to more processed foods”. Similarly, the Social Democrats is also pledging an increase in the tax and the introduction of a “Snack Tax”.

The Green Party also wants a levy similar to the sugar tax introduced on palm oil.

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About the author:

Rónán Duffy

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