Budget 2023: Fianna Fáil ministers play down chances of new 30% tax rate

Vivienne Clarke

Fianna Fáil Ministers have played down the likelihood of a new 30 per cent tax bracket in next month's budget.

Minister for Public Expenditure Michael McGrath said it would be "extremely challenging" to have a new tax band in place by the end of September, while Minister of State Sean Fleming said the party was more interested in indexing tax bands and tax credits to get extra income to lower and middle income families.

Speaking to the  Irish Examiner, Mr McGrath said Fianna Fáil was open to the idea of a 30 per cent rate, but there were a number of questions which needed to be answered about how it would be implemented.

The middle tax bracket, an idea first mooted by Tánaiste Leo Varadkar, was discussed in last week's Tax Strategy Group papers.

If the new band was introduced to cover income from €36,800 to €46,800, it would lead to an estimated tax saving of €1,000 per year for the individual.

However, the Government’s high-level tax strategy group also warned such a move would not be equitable.

The group estimated that indexing tax bands and credits would boost the take-home pay of up to 2 million taxpayers in the Republic while costing the Government between €630 million and €1.1 billion a year to implement.

Mr Fleming said introducing a 30 per cent tax rate would be very complex and it would be simpler to introduce straight forward measures such as indexation to income.

"We want to encourage people to contribute to pensions," he told RTÉ radio’s Today with Claire Byrne.

Mr Fleming explained that if people are on a 40 per cent tax rate they make a similar pension contribution, if their tax is reduced to 30 per cent then their pension contribution would also be reduced.

The 30 per cent tax rate was not discussed in the programme for government, he said, but he acknowledged that times had changed and the economic situation had changed.

Other measures were simpler, more straightforward, he said.

Mr Fleming said Fianna Fáil wanted to help low income families on the 20 per cent tax rate. A 30 per cent tax rate would help some people, but it would leave out more people, he added.

“We have to have something for lower income families.”

Indexation would help reduce the tax burden. Any benefits to help lower income families would “go up the line”, he said.

Mr Fleming said Fianna Fáil wanted to help as many people as possible. He was not against the 30 per cent rate, but it was a complex situation.