Budget will start process of cutting back tax, says Kenny

Next week’s budget will begin the process of cutting tax, Taoiseach Enda Kenny said yesterday, describing the combined 52 per cent rate on higher incomes as “burdensome”.

Mr Kenny was speaking at the launch of the Pathways to Work 2015 programme alongside Tánaiste and Minister for Social Protection Joan Burton and Kevin Humphreys, the Minister of State for Social Protection.

Mr Kenny also said the tax cuts introduced for middle- and low-income earners in next week’s budget would create an additional 15,000 jobs “over and above” what the Government believed the expected economic growth would achieve on its own.

However, he declined to say how the 52 per cent rate would be reduced, and his spokesman later declined to say if the changes would be adjustments to the bands, to the rates, or both.

Ms Burton said the Government was still considering a list of tax options, including adjustments to the universal social charge (USC).

“The burdensome 52 per cent rate is made up of income tax, PRSI and the USC, so the decision presented to the Cabinet by the Minister for Finance will deal with the process of beginning the reduction of that level, of the rate of 52 per cent,’ Mr Kenny said.

“That’s good for the economy and it’s good for people because they get a sense of clarity as to what extra they have. It’s good for potential employers in that they will know the process has begun of reducing that rate of tax. But clearly the intent here is to present in the budget of next week a reduction of that 52 per cent.

“It may well be that you may have to look at all of the factors that make up that 52 per cent, the USC, income tax and PRSI. Building on the success of the VAT cut for the hospitality and the tourism sectors, our plan to reduce tax rates on low- and middle-income earners is designed to create an additional 15,000 jobs by 2018, over and above our existing plans.”

Macroeconomic model

A spokesman later said this prediction was based on “a macroeconomic model from the Department of Finance”.

Pathways to Work 2015, which will introduce initiatives aimed at getting people off social welfare and back into employment, such as a "return- to-work dividend", is aimed at improving incomes for families who move from welfare to work. Under changes being drawn up by Ms Burton and her officials, a parent who takes a low-paid job would be able to keep welfare payments – known as qualified child increases – worth up to €30 per child per week.