Carbon tax rises to be part of future tax plan, says Varadkar

Taoiseach promises to increase top rate tax threshold to €50,000 over five years

Minister for Finance Paschal Donohoe declined to increase carbon taxes in last month’s budget but said it was his intention to put a long-term plan to 2030 in place that could see the tax rise to €100 per tonne.

Minister for Finance Paschal Donohoe declined to increase carbon taxes in last month’s budget but said it was his intention to put a long-term plan to 2030 in place that could see the tax rise to €100 per tonne.

 

Carbon tax rises will be a significant part of a tax plan that will include changes beyond the already promised pledge to increase the top rate tax threshold to €50,000 over the next five years, Taoiseach Leo Varadkar has said.

Mr Varadkar said the accelerated income tax cuts he announced at the Fine Gael Ardfheis at the weekend would not be the only tax measures his party would advocate at the next general election.

He said Fine Gael would increase the threshold at which people hit the higher 40 per cent rate of income tax to €50,000 for a single person over the next five years.

As a result of changes announced in the budget last month, the 40 per cent rate will be levied on income above €35,300 from next year on.

The Department of Finance estimates that Mr Varadkar’s plan will cost €3 billion over five years, and it has already allowed for an income tax package for roughly €600 million a year over that period.

Speaking on Monday, the Taoiseach said this did not mean Fine Gael’s only tax policy at the next election would be raising the threshold at which people hit the higher tax rate.

Taoiseach Leo Varadkar said the Government would raise carbon taxes over the next number of years. Photograph: Gareth Chaney/Collins
Taoiseach Leo Varadkar said the Government would raise carbon taxes over the next number of years. Photograph: Gareth Chaney/Collins

He also said the party would raise carbon taxes – which will see the price of petrol, diesel, coal and other fuels increase – over the next number of years. Carbon tax is currently levied at €20 per tonne, and a €5 increase would yield more than €100 million.

Minister for Finance Paschal Donohoe declined to increase carbon taxes in last month’s budget but said it was his intention to put a long-term plan to 2030 in place that could see the tax rise to €100 per tonne.

“If and when the election comes, we will produce a manifesto with further detail of our tax proposals,” Mr Varadkar said. “For example, we propose to continue to increase tax credits and anyone who pays income tax would benefit from that.

“If you took a truckload of coal today and took it across the Border, you could save €2,200. And next week you can save €3,300.” Photograph: iStock
A stockpile of a prime carbon offender: coal. File photograph: iStock

“As I announced at the weekend, we want equalisation for the self-employed. We are getting there already but we are not there yet. And we want to make sure that we continue to recognise the role of homemakers through the homemaker’s tax credit. And then, on the other side, we will have revenue-raising measures as well, for example carbon tax.

“We will produce a detailed tax package before we ask the people to vote on it and that obviously would form the basis for negotiations for a programme for government, with Independents or with other parties as the case may be.”

Confidence-and-supply deal

Meanwhile, talks are to resume today between Fine Gael and Fianna Fáil on a review of the confidence-and-supply deal. The review talks are scheduled to take place over three days this week, and will move on to the topics of childcare, transport and rural affairs.

Fine Gael is pressing Fianna Fáil to move the talks on to a potential extension of the deal but Fianna Fáil leader Micheál Martin yesterday said the review – which is looking back over the past 2½ years – could continue until Christmas. This was rejected by Fine Gael sources.