Ireland’s senior coalition party will ensure high earners do not make “extravagant gains” from planned income tax cuts and also raise the minimum wage by 15% by 2021 if re-elected, Finance Minister Michael Noonan said yesterday.
Ireland votes on Februry 26 in what promises to be a tight contest dominated by debate over how the resources freed up by a strong economic recovery should be spent and how or whether an unpopular additional tax levied on income, the Universal Social Charge (USC), should be unwound.
Noonan’s Fine Gael, comfortably ahead in opinion polls that nevertheless suggest it may struggle to form a coalition, plans to abolish the tax brought in during the financial crisis.
Yesterday Noonan outlined how the state would claw back some of the gains with a new 5% levy on incomes over 100,000 euros.
“Personal taxes are too high in Ireland but if you abolish the USC completely without any claw back, there would be very extravagant gains for people on the highest incomes,” Noonan told a news conference.
“They will still gain very, very significantly but not disproportionately. We will reduce the marginal rate of tax to 44% (from 49.5%) for middle income earners and to under 50% for everyone else.”
The ‘high income levy’ would mean the gradual benefit of USC abolition for a worker earning 100,000 euros would be capped at just over 5,000 euros versus 9,500 euros if there was no claw-back, Fine Gael said.
The state body that attracts foreign direct investment into the country has warned that income tax rates are too high and could make it difficult to keep winning investments from the multinationals that employ almost one in every 10 workers.
Fine Gael’s junior partner Labour, which is struggling in the polls, wants to scrap the USC on the first 72,000 euros of income, a similar proposal to the opposition Fianna Fail party.