Leo Varadkar: In Ireland people have to pay the highest rate of income tax on very modest incomes

Taoiseach Leo Varadkar has said he is “not hung up on” bringing in a new 30 per cent income tax rate, a proposal he floated earlier this year.

In a round-table interview, the Fine Gael leader said he is “determined” to offer tax relief whether it is by increasing the standard rate cut-off point or introducing a new “middle tax rate”.

Last March Mr Varadkar outlined how he had asked for a new 30 per cent tax rate to be considered by the Government.

The idea met some resistance from within the Coalition with a lukewarm reaction from Fianna Fáil and opposition from the Green Party. There was also concern that the move would involve a substantial reorganisation of the tax system at relatively short notice.

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In August, then minister for public expenditure Michael McGrath – who is now the Minister for Finance – said it would be “extremely challenging” to have a new tax band in place by the budget at the end of September.

[ Cliff Taylor: It is time to kill off the idea of a new 30% income tax rate ]

The measure was not included in Budget 2023.

The income tax rates stayed the same at 20 per cent for the standard rate and 40 per cent for the higher rate and the standard rate tax band was increased by €3,200 to €40,000.

Mr Varadkar was asked if the 30 per cent rate will be introduced now that he has returned to the office of Taoiseach.

He said: “We want to help people somewhat with the cost of living, certainly, with a combination of pay rises and income tax reductions.”

Mr Varadkar added: “I believe that work should pay and I think that in Ireland people have to pay the highest rate of income tax on very modest incomes.

“We’re getting to [a standard rate cut-off point] of €40,000 next year. I’d like to move that up.

“The policy objective that I have set is that we should get to the point where people can earn up to €50,000 a year without having to pay the highest rate of income tax.

“It might take a few budgets to get there. But I’m determined that we should, whether we do it by increasing the standard rate cut-off point or by a middle tax rate.”

On the 30 per cent rate, Mr Varadkar said: “I’m not hung up on that and I never have been. But that’s something obviously we’ll have to discuss at Government level between now and the next budget.

“But certainly if the public finances allow it, I would like to see us continue on that road so that you will be able to earn more without having to pay the highest rate of income tax.

“We’ve moved a long way in the last couple of years on that. And I want that to continue.”