Budget boost for workers as lower income tax band to widen to €35k

‘Aim is to get it to €40k down the line’

THE entry level to the higher income tax band will be increased to €35,000 a year in the 2018 Budget, the Irish Mail on Sunday has learned.

Fianna Fáil says it would prefer to see a cut to USC, which it says was agreed with Fine Gael in their confidence and supply deal.

The Budget will be delivered to the Dáil by Finance Minister Paschal Donohoe in a fortnight – on Tuesday, October 10.

The Government has stressed that it will introduce €1.8bn in additional spending from measures announced in previous budgets.

Mr Donohoe revealed yesterday that he will announce an infrastructure plan after the Budget.

These statements indicate that the Government is preparing the public for minimal vote-winning announcements in the first Budget in Taoiseach Leo Varadkar’s administration.

The tax-band widening will be Fine Gael’s central tax change.

‘The big thing isn’t the higher rate – it’s the early point in the scale that it kicks in. It is ridiculous that people on the average industrial wage in this country pay the higher rate of tax,’ said a senior figure at the Department of Finance.

Every euro earned over €33,800 is subject to the 40% rate of tax. It was €32,800 in 2014.

Mr Donohoe has previously indicated that widening the tax bands, recognising the contribution of the self-employed and amalgamating the universal social charge and PRSI over time are the three solutions being explored by Fine Gael.

A department source said widening the band would give people the ‘opportunity to earn more money, pay less tax and spend money as they see fit – it’s ridiculous that on an average industrial wage, those who do overtime lose half of it’.

‘Ultimately, down the line we have to get to €40,000.’

Mr Donohoe told the Dublin Economics Workshop yesterday: ‘Budget 2018 will see an additional €4.1bn for capital investment across the next four years. This will see public capital expenditure increase by 2021 to €7.8bn.’

He said he hopes to stretch out his financial announcements after the Budget.

‘The Government will be publishing a 10-year capital plan for our country not long after the Budget, which will seek to address the investment, housing and spatial planning issues,’ he said.

He added that the Government would invest in new supports to assist families and to help businesses plan for the future.

He said the goal would be to balance the books but also to ensure security remained in risky environments.

The Government has repeatedly committed to the additional €4.1bn in capital spending between 2018 and 2021. The extra money had already been flagged in Budget 2017 and the spring economic statement.

The latest review is seen as a precursor to the 10-year national investment plan, which is expected before the end of the year.

Since the Government’s capital plan was first announced in 2015, approximately €6bn has been added to the original €20.9bn capital budget, against a backdrop of infrastructural bottlenecks in housing, water, health and education.

Some €2bn of this has been earmarked for housing while the residual €4bn will go towards other infrastructural deficits. These include building and improving roads, public transport infrastructure, broadband, schools, health and flood defences.