PAYE tax rates would stay the same under a Fine Gael plan to stimulate the economy, though higher earners would pay a solidarity levy for three years.
Under the plan, Fine Gael said it would force through €3.5 billion in savings; make 15,000 public servants redundant ; and make workers pay PRSI on all of their pay.
The 13.5 per cent VAT rate would be cut to 10 per cent until 2011 to encourage people to holiday at home, do up their home and other actions that benefited Irish jobs.
The top VAT rate of 21.5 per cent would be cut by 0.5 per cent, said Fine Gael TD Richard Bruton to stem the haemorrhage of Republic shoppers to Northern Ireland.
Launching the plan with Mr Bruton, Fine Gael leader, Enda Kenny said: “If we don’t fix the jobs crisis we won’t fix the problem in our public finances.”
Employers would enjoy a PRSI tax break if they take on new workers, while workers would be able claim some welfare benefits within six months, not two years.
In addition, workers should be able to claim reduced unemployment benefits if they have to go on a four-day week, not a three-day week, or less, as now.
Defending the decision to leave tax rates alone, Mr Bruton said: “We cannot continue to chase down the economy with more and more taxes.
“The Fine Gael approach recognises the need to fix our public finances but sees the much larger share of the correction coming from spending controls rather than new taxes. Two thirds of our savings come from spending controls, one third from new sources of tax,” he said.
Last week, Fine Gael proposed a new super-state agency that would command existing commercial state bodies, such as the ESB and Bord Gáis.
A cut in red-tape for small businesses would save them €1.5 billion over the next two years, though it is not clear what paperwork would be eliminated.
The gap in the Exchequer’s fortunes left by the collapse in property tax revenues and sharp cuts in personal taxes over the last decade should be fixed by 2012.
“We have to fix the public finances the next four years and not keep pushing the target date off. We have focused our approach on tackling the spending side of our budgets rather than going for excessive tax hikes. No economy ever taxed its way back to recovery,” said Mr Bruton.