Cost of tax credits for low paid workers and increased social welfare laid out in Government papers

Tax credits to boost low-paid workers’ wages, the cost at the pumps for planned increases to carbon tax on petrol and diesel, and the cost of increasing social welfare payments have been set out in newly published Department of Finance papers.

Options for extending the low-yield Electricity Tax to residential users are also detailed as is the possible medium to long-term use of congestion charges or weight-based taxation of vehicles to help make up for a loss of fossil fuel taxes in the future as Ireland implements its climate action plans.

The Tax Strategy Group papers are published each year and they provide wide-ranging advice on the impact of options the Government could consider ahead of Budget Day.

The Group’s findings are closely watched as they are traditionally seen as an indicator of policies under discussion ahead of the Budget.

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The group is made up of officials from the departments of the Taoiseach, Tánaiste, Finance, Public Expenditure, Enterprise and Social Protection. Officials from the Revenue Commissioners are also involved.

The group is considering the introduction of refundable income tax credits, a system that would mostly benefit low-paid workers.

Revenue “tentatively estimates” the likely cost of such a scheme at €1 billion, leading to a significant loss of income to the State.

As the system refunds cash to workers whose income is too low to use up all their available tax credits, it is seen as a way of aiding those in low-paid jobs.

However, the report cautions that detailed consideration of the costs, benefits and whether the move would be the best use of public resources, is needed before any decision.

The group also questions whether their introduction would tackle the causes of “in-work poverty”.

The paper on the Social Protection Budget Package outlines the full-year cost of increases for various welfare payments.

Last year’s Budget saw an across the board €12 increase in weekly payments to pensioners, people with disabilities, carers, lone parents and working age people, with additional increases for qualified adults and dependent children.

The document sets out how every €1 increase for weekly personal rates of all weekly paid social protection schemes – with no additional increases for dependents – would cost €69.4 million over a full year if it was introduced from January.

Taoiseach Leo Varadkar last month said there will be a “substantial welfare and pensions package” in the upcoming budget.

However, he indicated it would not be the same as last year’s mix of the €12 increase in weekly payments and once-off lump sums designed to help with the cost-of living crisis.

Mr Varadkar said: “We will have to do a series of increases again, but perhaps will have to take a different approach”.

He added that while “one-offs have their place”, they “are not a long-term solution”.