Workers will see a “very substantial” reduction in their income tax burden in September’s budget with larger welfare increases than last year also planned, Tánaiste Leo Varadkar has said.
Speaking in Balbriggan, the Fine Gael leader said there would be a particular emphasis on middle income workers but that all workers would benefit from significant reductions.
It comes as the Government published its tax strategy papers outlining what options are available in terms of tax changes in Budget 2023.
“I think the most important thing to emphasize in relation to the budget, which is now only just over a month away, is that it will contain a substantial income tax package that will reduce income tax for low income workers, middle income workers, higher income income workers with a particular emphasis emphasis on middle income workers. But what is absolutely agreed as the principle is that we will see a very substantial income tax reduction package in the budget. Almost all benefit workers will benefit from that. And it’s necessary because it’s one of the ways, not the only way, but one of the ways that we can help people with the rising cost of living by making sure that they can keep more of their hard earned money and making sure the work pays better.”
He said the package would be “greater than what people would have seen in recent years”.
Speaking about the planned welfare package, Mr Varadkar said that there were “across the board increases in the weekly payments back in January, as well as increases in some very targeted payments like fuel and living alone allowance for example. I am confident that we will see a welfare package in September that is bigger than the one that we saw in the last budget and it needs to be because of the cost of living. It’s not right for me at the moment to speculate on exact numbers, because at the end of the day, the budget has to add up and there are competing priorities.”
Mr Varadkar also indicated that income tax could be index linked to wage inflation, although he said there are various estimates of what wage inflation is now. Some estimates have placed it anywhere as high as five per cent.
“What the program for government says is that we will index tax credits and tax bonds to wage inflation. Exactly what wage inflation is has to be worked out and there’s different ways of calculating it.”
He said “incomes are also rising much faster than they have in a very long time. And that means that in the upcoming budget, we can have a tax package that would have been bigger than the ones we would have seen in recent years or over the past eight years”.
Speaking about the tax papers, he said the Government “hasn’t decided to do anything at all contained in the tax strategy papers.”
“They are just options for the Government to consider between now and Budget Day and there are lots of options to consider. The possibility of the 30 per cent tax rate for middle income people is under consideration.”