High-earner tax dropped due to FDI
Minister for Finance Michael Noonan said Labour’s proposal for a 3 per cent increase in the universal social charge (USC) for those earning €100,000 was rejected on the advice of the multinational sector.
Mr Noonan has also hinted next year’s budget could be revealed as early as October when he addressed a post-budget press conference last night.
He said the Cabinet had discussed the Labour proposal to increase the USC for high-earners but was advised it could give an advantage to Ireland’s competitors for foreign direct investment , particularly the UK.
“The people who were advising us not to do it were the multinational sector in the country…when it comes to the individual tax rate the decision set up here in UK or in France is very often down to the chief executive who’s coming to work here and he looks at his pay package.”
Mr Noonan said measures adopted recently by the UK government meant that State was now Ireland’s “direct competitor” for foreign direct investment, and the Irish Government was very conscious of that.
“So having looked at a lot of options in the expenditure side and on the tax side we decided that it was better not to do this and not put what is going so well at risk at present.”
The budget announced yesterday afternoon was “fair across the spectrum”, Mr Noonan said. “I think it’ll be recalled as a very reforming budget.”
He said dialogue with the European Parliament was almost concluded and would probably mean a detailed draft of the budget would be required to be published by October next year.
“In Ireland we might be better off to do the whole thing in October rather than to have a detailed draft budget out…there’s a policy decision to be made.”
On increasing excise duty on alcohol, Mr Noonan said vintners and wholesalers increased the price of drink most years. “They added a bit on again in the run into the budget. It’s an old trick to add it on before the budget and blame the Government for excise changes that didn’t take place,” he said.
Minister for Public Expenditure and Reform Brendan Howlin said the Government was “not happy” to introduce some of the measures he said it was required to implement. The State was well on the way to see a return to normal market funding. “The Irish people have done the bulk of the hard lifting,” he said.
“This is a joined-up Government giving a joined-up budget.”
On the decision to reduce child benefit, he said the welfare payment had been “built up in the good years and rightly so”. He said “alleviation measures” had been introduced. “In the timeframe we had I’m afraid a rate cut was the only option that presented itself to us but I think we can be more sophisticated in dealing with child benefit into the future.”
He said there was general consensus that people were getting the payment who did not need it.
Mr Howlin said the decision to tax maternity benefit was a meant to “equalise” the payment in a way that was fair. “It’s a very simple equality issue. Women who are on maternity benefit shouldn’t be earning more than people who are working,” he said,
He said he wanted to see a move away from the traditional method of putting a budget together and “big bang” announcement on budget day.
“We need to get away from the notion that the Government goes into a huddle…we need to get the Dail if they are interested involved,” he said.
“We don’t have that level of political maturity but we need to get there.”
Submit your budget queries to experts from The Irish Times and PwC who will answer questions until noon on December 6th.