The two Government Ministers who announced the Budget have said it was principally directed at the “squeezed middle” or “coping classes” in society.
At a press conference in Government buildings tonight, Minister for Finance Michael Noonan and Minister for Public Expenditure Brendan Howlin said that most of the tax benefits were focused on households with income between €30,000 and €70,000.
Both argued that those with the lowest income had not been neglected. Mr Noonan said lower-income groups could not get relief though income tax so they had taken a tranche of people out of the Universal Social Charge net. Mr Howlin also pointed to the successive increases of €5 per month in child benefit that will be introduced in 2015 and 2016.
“The objective will be the same, to target the squeezed middle and to be fair to those in the middle,” said Mr Noonan, who said that those earning above €70,000 would not benefit more than those at €70,000, because the increase of 1 per cent in USC for those earning more than that amount would counter the decrease of 1 per cent in the higher income tax rate.
That USC change, said Mr Noonan, would mean that those earning high incomes in the hundreds of thousands would not make “astronomical gains”.
Mr Noonan also strongly indicated that the tax reforms to reduce the marginal rate over the next three years would not bring an end an USC. He said that there was a reluctance to remove a tax instrument that took in €4 billion each year. Mr Howlin pointed out that it was “harder to shelter income” from it.
Responding to questions that it was an election or giveaway budget, Mr Howlin argued that some commentators stuck in the rut about the bailout and the Troika
“We are no longer in a programme. We are are no longer bound by programme rules,” he said.
Both said the GDP deficit target of 2.9 per cent would be achieved and exceeded, although Mr Howlin did admit that the upturn in the economy in recent months gave him more options than he though he would have.
“Some of our political enemies (argued) the notion that we continue to reduce expenditure as we have done for seven years.
“That is okay if you subscribe to the old British navy maxim: “We will keep flogging them until morale improves.”
Mr Noonan said the thinking behind the ‘patent box’ was to get intellectual property inshore and to offer competitive rates compared to other EU counties such as Britain.
He said the Government would not outline its proposals regarding the introduction of such a measure until the European Commission gave details on what was acceptable. He said that, given the international competition for foreign direct investment, the intention was to come up with an idea that would be "if possible, the best in the class".
