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Leo Varadkar says plan to raise top tax rate to €50k may have to wait

The Taoiseach defended the policy but said it may not happen immediately.

Taoiseach Leo Varadkar.
Taoiseach Leo Varadkar.
Image: Leah Farrell

TAOISEACH LEO VARADKAR has told the Dáil that a promised tax cut to come in over five years may not begin in the upcoming budget. 

At the Fine Gael Ard Fheis last year, Varadkar committed to increasing the point at which people pay the top rate of tax to €50,000 for a single person and €100,000 for a double-income couple. 

The Taoiseach proposed to raise the threshold by €2,500 each year over the next five years from its current level of €35,300, in the case of a single worker.

In last year’s budget, the government had increased the entry rate by €750. 

Responding today to a question from Sinn Féin’s Pearse Doherty TD, who said such a measure would be “not credible in light of the significant challenges”, Varadkar suggested that the threshold may not be raised in the upcoming budget.

“I appreciate that he may not have had a chance to read the summer economic statement yet, but on page 38 he will find Annex 1 which indicates how tax relief of approximately €600 million a year could be achieved while allowing much more money to be made available for investment in public infrastructure and services,” Varadkar said.

The ratio is probably one of 3:1 or 4:1 and it can be accommodated within the fiscal space.  That is not necessarily to say it can be started in the forthcoming budget, which will depend on other factors.

Varadkar also defended the policy itself, saying that it is “a tax policy of my party and one we stand over”.

Doherty had said that it is “a cut that would not affect 80% of taxpayers in any way”.  

“Anyone earning over €37,000 a year would benefit from it.  The average person working full-time in Ireland now earns €47,000 a year,” Varadkar said.

As such, it is not only middle-income people who will benefit, it will be people who earn less than the average income.  Certainly, higher income earners will benefit too but the vast majority will be middle-income earners on €35,000 to €50,000.  Those who gain the most in percentage terms will be in that category. 

Doherty said the proposed cut represented an “election promise” and that the €3 billion it would cost could be better spent elsewhere. 

“There is no doubt that families are facing a crisis with living costs increasing all the time and the economy does face significant risk. Is it clear that investment is needed, particularly in areas such as housing, healthcare, education and several other,” Doherty said. 

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Rónán Duffy

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