The €1,000 tax-cut pledge is not included in the options for changes to income tax strategy in the upcoming Budget. A report by the Tax Strategy Group (TSG) does not consider reducing the income tax burden for middle-income earners by €1,000. This suggests that Finance Minister Michael McGrath may not be supportive of a full tax break. The TSG report examines two options for increasing the standard rate income tax band, but these would only result in a reduction of approximately €300 per year. In order to achieve a €1,000 tax break, the standard rate band would need to be increased by around €4,000.
The report also considers other potential changes to the tax system. One option is to increase self-employed PRSI contributions by 30% to €650. Another is to extend and widen the bank levy. There is also a proposal for a new tax on bottles and cans, with a refund available for recycling. However, the report does not support the idea of refundable tax credits, as it may be too complex to implement.
The report also discusses the possibility of a VAT reduction for the construction sector. While this could cost the taxpayer €580 million, it may ultimately lead to price increases on homes. Contractors may use the tax cut to improve their cashflow, and if the cut is reversed, home-buyers may face increased taxes. The report advises caution when using tax cuts as a way to address short-term challenges, citing Ireland’s past experience with property bubbles. Instead, it suggests cash injections or more regulation.
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