Rabbitte says Budget will focus on real tax reform

THE primary focus of the next Budget would be real tax reform the Minister of State, Mr Pat" Rabbitte, said last night, staking out the Democratic Left ground in the three party Coalition.

As far as DL was concerned this issue was not whether there would be tax reform to benefit PAYE workers, but rather how that tax reform should be structured.

Mr Rabbitte told a DL meeting in Limerick that he rejected the simplistic "reduce the rates" agenda of the alternative government "which is driven by the PDs and lamely acquiesced in by a timid Fianna Fail slavering to get back in power at any cost".

Meaningful tax reform was not about reducing the tax rates by a few pence but rather it was concerned with the very low income thresholds at which the taxpayer became liable to tax in the first place and at the absurdly low levels of income at which the marginal or top rates applied, he said.

"For people on lower and middle incomes, the objective must be real tax relief through the twin strategy of raising the point at which tax becomes payable, and a substantial rise in the threshold above which the top rate applies. In addition, taxes such as water charges must be addressed in providing real relief for PAYE taxpayers.

Turning to the Irish economic indicators, Mr Rabbitte said that Irish growth was running against the trend. Inward investment was very strong, laying the ground for future growth through adding significantly to future capacity. Inflation remained very low and interest rates were also low. Employment was growing strongly.

On spending and borrowing, the Coalition parties had an agreement that included detailed commitments aimed at maintaining discipline and prudential management of the nation's finances. They were also committed to the Maastricht criteria and next year was the critical year for Maastricht.

The coming months would be crucial for the development of incomes policy and the issue of a replacement for the PCW. The Government was committed to securing a realistic and economically prudent agreement if possible.

In relation to tax reform, Mr Rabbitte said the pressing priority was for reducing the tax burden on low and medium earners, taking as many as possible lower earners out of the tax net. "This suggests, first of all, continuing to raise the basic tax free allowances and, beyond that, giving priority to reducing the standard rate," he concluded.