Middle-income earners will pay less than 50pc tax on their salaries for the first time in six years, it is being reported. With the Budget on October 13th , the Government will lower the effective higher rate of tax to at least 49.5pc, several senior government sources confirmed. Those sources also said there was a “strong desire” to reduce the tax burden on middle-income earners to as low as 49pc, if this proves achievable. “The desire is there, it is now just seeing what is achievable in the final shake-up of the numbers,” one senior source said last night. Finance officials have concluded the bulk of their work on the Budget. The deeply unpopular Universal Social Charge is set to be the principal target.
While the Budget is not yet finalised, there is a strong desire within both Fine Gael and Labour to deliver a 2pc tax cut, should the numbers allow it. “We would love to do it, but certainly at this stage we are looking at a 1.5pc cut,” said one well-informed Government source. Were the Government to achieve a 2pc reduction through cuts in the USC, those earning €70,000 would be more than €1,000 better off, those on €50,000 would be €650 better off and those on €35,000 would be €350 better off. John Lowe the Money Doctor stated “Any reduction is a help. It’s just a pity this reduction will be in such close proximity to a general election.”
This week, a series of key meetings will take place between Mr Noonan and Public Expenditure Minister Brendan Howlin and their Cabinet colleagues. Once those face-to-face meetings are concluded, Mr Noonan and Mr Howlin will bring a draft Budget document to the Economic Management Council, on which they sit with Taoiseach Enda Kenny and Tánaiste Joan Burton. The overwhelming focus of the tax cuts is on the penal burden of the USC, particularly for those earning €70,000 or less.
Mr Noonan is looking at a cut to the 7pc rate and examining raising the entry point at which people start paying the USC. “The net effect when both measures are combined will be 2pc,” said a senior Government source. Coalition sources have confirmed that the USC cut will be used as their ‘big bang’ give-away to workers. It is understood that the entry point at which people begin paying the current 7pc rate will be raised to bring more than 500,000 people out of the USC net. But it is also known that the 7pc rate will be reduced by up to 1.5pc. Mr Noonan is also believed to be looking at reducing the gap between self-employed people and PAYE workers on incomes above €100,000.
Meanwhile, Lucinda Creighton’s Renua is proposing to introduce a levy on all public-sector pensions over €60,000 to claw back some of the pensions paid to former Taoisigh Brian Cowen and Bertie Ahern and former top officials, some of whom have pensions in excess of €100,000. “When they imposed a levy on private pensions during the financial crisis, they defined the limit as being €60,000 per annum,” the party said. “Renua Ireland believes that no public servant should be in receipt of a gross pension exceeding this sum.”