The Irish Mail on Sunday
‘CRIMINAL’ BURDEN PF FG TAX
With just days to go to the elections, Junior Finance Minister (and would-be MEP) Brian Hayes slams tax system and warns Kenny of 1980s-style tax marches
THE amount of tax being paid by middle-income earners is ‘criminal’, a Fine Gael minister has complained.
The charge has been made by Junior Finance Minister Brian Hayes who issued a warning to his own Government to cut tax or face electoral oblivion in the next General Election.
Mr Hayes said he believes the Government needs to act quickly to ease the pressure on middleincome earners.
‘Unless they tackle personal taxation there isn’t a second term for the Government,’ he said. He also predicted there would be ‘tax protests’ similar to those seen in the 1980s unless the Government acts.
His intervention came as a poll published by the Sunday Times showed that both Government parties look set to sustain losses in the local elections, and that Sinn Féin will poll the highest number of first preference votes in Dublin in the European Parliamentary elections.
‘We have got to do something for that group of people who are on very average pay and yet find that increasing amounts of their income are being taxed –
‘I agree with what Pat Rabbitte said’
and not at 41%, but at 52%.
‘When you add in USC (Universal Social Charge) and PRSI, it’s 41% plus 7%, plus 4%, and it is criminal that a group of people are clobbered at that rate of tax. In Britain you only pay the top rate of tax at the equivalence of €150,000. In this country on everything over €38,200 you pay 52%, so that’s the group we have to target. I think indexation of bands or additional tax credits could help.’
Indexation is a method of increasing tax bands to take account of inflation. Tax credits allow people to earn a certain amount of money without paying any tax at all.
Mr Hayes, is tipped to take a seat in the three-seater Dublin constituency. Today’s poll in the Sunday Times predicted that he will win 15% of the first preference votes in the capital, just behind Sinn Féin’s Lynn Boylan.
The Taoiseach and Finance Minister Michael Noonan have so far taken a cautious attitude towards the prospect of tax cuts, saying only that they ‘hope’ tax cuts will be possible if the economy continues to improve. International think tanks and the EU are encouraging the Government to continue with €2bn savings this year.
However, Mr Hayes’s position as a junior minister who is involved in budget formulation will only serve to increase pressure on Fine Gael’s two most powerful Cabinet members to give a more clear-cut signal that tax cuts are on their way.
Fine Gael will be in trouble with the electorate if they don’t cut tax, according to Mr Hayes. He said: ‘The only issue I am hearing is the economy. Unless the Government in the budgets between now and the general election, tackle personal taxation there isn’t a second term for the Government.
‘I agree with what Pat Rabbitte said this week: people are at the pin of their collars, it’s the people who are paying for everything, who are simply clobbered on tax. And we have got to get to the point where we are giving those people some relief.
‘Otherwise not only will there not be a second term for the Government, you could potentially face another PAYE revolt as we had in the 1980s.’
Mr Hayes believes the Government must use the next two budgets to cut tax. He said: ‘It’s crucially important that the Government focus on a twobudget strategy to start relieving the tax burden, particularly for that middle income group who aren’t just the squeezed middle, they’re the frozen middle: they are frozen out of the domestic economy.’
Mr Hayes said that using the taxation system to boost people’s take-home pay would boost consumer confidence. ‘We have to do more on public expenditure. Obviously we have to get under the 3% deficit target but I think that will come,’ he said.
‘The best stimulus is to put money back into people’s pockets. That will help the domestic economy, will get spending going again and will get people back to work. It’s the one area that we need help.’
Although cutting the top tax rate would be popular, increasing the tax bands would actually offer more relief, Mr Hayes argued. ‘I think a tax cut of a percentage point would do least for them, so either we look at the issue of tax credits, the further indexation of bands, or a new rate of tax for the middle.’
While the Taoiseach didn’t address the subject of tax cuts yesterday, he accepted that a move to increase the USC rate for 360,000 medical card holders and pensioners whose lower rate of USC is due to expire in January could be put on hold.
‘This Government is committed to flexibility in the tax system, to giving our taxpayers concessions where that can be done based on the strength of the economy,’ said Mr Kenny.