INCOME tax could be reduced by £800 million over three years if unions and employers sign up to a new agreement to succeed the Programme for Competitiveness.
This could be the equivalent of a 10 per cent increase in take home pay for many PAYE contributors and will provide a powerful incentive for trade union and employer negotiators to reach agreement when talks on a new accord begin on October 23rd.
The prospect of the tax cuts is outlined in a report by the Government sponsored National Economic and Social Council presented yesterday.
NESC chairman, Mr Paddy Teahon, secretary of the Department of the Taoiseach, said that when unions start to negotiate a new national agreement they would have "a very clear" idea of the value of the tax cuts available each year.
The cuts could be worth £250 million in the January budget and their overall value would be £800 million over three years, when allowance is made for growth in the economy.
The State's largest union, SIPTU, has indicated that it is looking for tax cuts of at least £800 million in any new deal.
Mr Teahon was speaking at the presentation of Strategy into the 21st Century", the NESC report which sets out the broad parameters for talks on a new agreement to succeed the PCW.
Its findings have been welcomed by the Irish Business and Employers Confederation and the Irish Congress of Trade Union, both of which are represented on the NESC.
The report recommends that the bulk of tax cuts should go towards increasing personal allowances and reducing the standard tax band from 27 per cent to 25 per cent. It also calls for a reduction in PRSI for low wage. sectors. Overall, the proposed reductions would benefit low to middle income earners most.
A reduction of 1 per cent in the standard rate of tax would cost some £89.5 million. A 1 per cent. cut in the marginal 48 per cent rate costs £50 million.
Other priorities identified in the report include improving the general industrial relations climate by promoting partnership in the workplace, curbing the growth in public sector expenditure, preparing for European Monetary Union, combating social exclusion and reducing crime.
It also calls the a significant widening of the forum in which a successor to the PCW will be discussed. It proposes involving groups from the voluntary and community sectors.
However, the Government statement accompanying the report made it clear that negotiations on pay and related matters would remain a matter for IBEC, the ICTU and itself as an employer in the public sector.
NESC says that real tax reductions must be accompanied by curbs on public expenditure. The real increase in the current account must not exceed 2 per cent a year and the national debt/GDP ratio should be reduced to 70 per cent by 1999.