Labour reacts angrily to five-year tax plan proposal

The Labour Party has reacted angrily to the prospect of a five-year tax reform plan being included in the Government's forthcoming spring statement on the economy.

The Irish Times reported on Thursday that the Coalition was considering including such a plan with its economic statement in April, which will outline updated figures and targets for the economy and employment.

Minister for Public Expenditure Brendan Howlin said he was "perplexed" by suggestions about the tax plan and had discussed the issue with the Minister for Finance. "I read speculation of it having a five-year tax plan," Mr Howlin said when asked about the spring statement. "I discussed that with Michael Noonan and he is as perplexed as I am. There is no such intention."

However, senior Coalition sources say such a plan is under active consideration for issuing with the statement, even though nothing has been finalised yet. Fine Gael is more keen on the idea than Labour.

Any such approach would be a broad statement of tax reforms to be implemented over the coming years, running into a second term of office for the Coalition.

Spring statement

The spring statement will not be used to announce immediate tax changes, which will come in future budgets.

Fine Gael believes the template for tax cuts for the next budget, and for the first one following the election if the Coalition is returned to power, has already been set.

This would reduce the higher rate of income tax, increase the threshold at which people enter the higher rate, reduce two rates of the universal social charge by half a per cent and impose a higher rate of USC on those earning more than €70,000.

However, Labour sources on Thursday night said “nothing is set in stone” for any future budgets.

Mr Howlin said the Government had already indicated it will be providing a stability programme update to the European Commission in April and said the spring statement "won't be a budget".

“We want to make sure that we can have a proper presentation of not only the progress we’ve done economically but where we intend to go.”

Job creation

Minister for Children Dr James Reilly hinted that income tax reductions and job creation would be in the spring statement.

“The Taoiseach indicated that in the spring, he may take advantage of a statement to outline [how], over the next five years, this Government will continue to support the recovery and make work more valuable for parents, families and everyone who’s in the workforce.

“[The details] still have to be discussed by Cabinet and internally by different Ministers in different departments and then we’ll come [forward] with something more comprehensive and informative in the spring.”

Dr Reilly denied there were tensions between Fine Gael and Labour about proposed cuts to income tax, and said the focus was on job creation.

“Jobs is where it’s all at. I really think it’s important to emphasise that every job we create means another of our citizens is now financially independent, their families are independent and their communities have more money circulating in them.”