Irish Economy 2014: The Department of Finance in its 2014 Stability Programme Update is reported to have retained the existing plan for €2bn in tax rises and spending cutbacks in 2015, while in recent months Michael Noonan, finance minister, has made it clear that he hopes to cut the income tax burden in next October's Budget.
The annual report is prepared for the European Commission and will be published today.
Enda Kenny, taoiseach, has also said he accepts that “income tax levels are too high here,” after IBEC, the business lobby group, advised the Government to cut income tax as a means of boosting consumer spending because many employers can not afford wage increases.
Noonan has also said that that income tax was too high, stating that it was damaging job creation.
“As soon as we have resources will be widen the average rate band of income tax so the people can earn more before hit the higher rate and can do more overtime” before they are also hit. He added that it was “not a process to endear ourselves with the people.”
The game plan is to avoid alarming the European Commission now while Noonan is hoping economic conditions in six months will allow him to have a fiscal package below €2bn with some funds for income tax cuts and maybe also some new stealth taxes.
The interest in income tax is motivated by politics not job creation, to impress workers with rising net pay.
Last week, the ESRI said that the Government could be in a position to achieve the EU budget deficit of 3% or below next year without any negative fiscal adjustment other than introducing the new water charge but it cautioned that the Government should continue the existing adjustment plan just in case economic conditions change.
A government leak to political correspondents signalled that growth of 2.1% in gross domestic product is forecast in the report, up from 2% in the budget for 2014.
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