Cut taxes for Brexit strategy: Donohoe

Minister’s ‘pitch’ for Noonan job

Kevin Doyle and Philip Ryan THE Government must cut tax or it risks losing jobs to other countries in the wake of Brexit, Public Expenditure Minister Paschal Donohoe has warned.

Writing in today’s Sunday Independent, the minister says workers should not be forced to hand over half of their income to the State when they are earning relatively low wages.

In an intervention ahead of the forthcoming Fine Gael leadership contests, Mr Donohoe insists the marginal tax rate needs to be lowered if Ireland is to remain an attractive destination.

The warning comes as reports suggest UK Prime Minister Theresa May could formally trigger Britain’s exit from the European Union on Tuesday.

Mr Donohoe again categorically rules himself out as a candidate to replace Taoiseach Enda Kenny after he steps down as Fine Gael leader on his return from his St Patrick’s Day State visit to the United States.

However, Mr Donohoe’s comments could be perceived as a pitch to replace Finance Minister Michael Noonan under the next Fine Gael leader.

Mr Donohoe’s call for lower tax chimes with recent comments by Social Protection Minister Leo Varadkar who said Fine Gael should reduce tax because “people know best how to spend their own money, and deserve to be rewarded for work”.

Currently, employees move on to the upper tax rate of 40pc when they earn over €33,800, however once the universal social charge and PRSI are factored in the marginal rate is closer to 50pc.

Mr Donohoe believes politicians need to be more conscious of the marginal rate.

“In the world of Brexit and other economic challenges, it is not sustainable to keep jobs we have or to attract new talent if you keep less than half of what you earn above a relatively low income level,” he says.

Meanwhile, in an interview in today’s Sunday Independent, Housing Minister Simon Coveney says Fine Gael should focus on “people who feel they are not being represented by Government at the moment” and those who “believe there is nothing in it for them from economic growth”.

Mr Donohoe also sets out his vision for Fine Gael and the country — but continues to insist that he will not be entering the race to replace Taoiseach Enda Kenny.

It is understood he has been approached by a number of colleagues who want him to go up against Social Protection Minister Leo Varadkar and Housing Minister Simon Coveney.

But Mr Donohoe tells this newspaper: “I’m very clear that when the Taoiseach decides to step down I will not be a candidate to replace him.

“But I’m equally clear that the process which takes place should be a debate about ideas and about the future of our party.”

The Dublin Central TD has attempted to set the narrative for that discussion today with an outline of the policy areas he believes Fine Gael should focus on.

He openly admits that the party gave the impression during last year’s election campaign that it cared more about economic indicators than the social problems created by what he calls “the Great Recession”.

There is some speculation in Cabinet circles that Mr Donohoe will be appointed Finance Minister by the new leader and his message on taxation echoes a recent speech by Michael Noonan.

Mr Noonan told the annual dinner of the Irish Tax Institute there is “good case to reduce personal taxation rates further”.

One of the key election promises from Fine Gael was to abolish the USC, which was originally introduced as an emergency tax in 2011.

However, the Programme for Government commits to dividing any extra resources two to one in favour of spending over tax cuts.

At the same time it also acknowledges that higher personal tax rates “discourage work and jobs” and that the tax system needs to be “more competitive”.

In his article Mr Donohoe says the image of Fine Gael as a party “of the wealthy farmer and the big shopkeeper is alien to me”.

“I believe that Fine Gael is the party of those who work to look after themselves and their families and who deserve support to cope in a changing Ireland and volatile world,” he says.

He also makes reference to the ‘Just Society’ report which was conceived by Declan Costello, son of the former Taoiseach John A Costello, in 1965.

Mr Donohoe suggests Fine Gael needs to revitalise some of the ideas in that document which focused on the need for social reform.

He says the resources should be used to improve public services “but only when it is accompanied by relentless reform”.

Mr Donohoe says that Fine Gael vision must stand out at a time when the Dail is filling up with “absentee legislators who rejected the chance to govern in favour of perpetual protest”.

And in a thinly veiled attack on Fianna Fail’s latest position on water charges, he writes: “It is also very different from the recent debate that suggested that the Government introduces a law to take citizens to court for a service that we will not charge them for.”

He concludes that Irish politics is moving “further and further to the far left” in “an auction of outrage over every single matter”.