Lower income families could be repaid up to €2,400 in tax every year under plans being considered by Fine Gael as a key element of its general election campaign.
A new policy of allowing the Revenue Commissioners refund unused tax credits to individuals earning below €16,500, or couples earning €33,300 a year, is detailed in internal documents discussing Government and party policy.
The move has been advocated by groups such as Social Justice Ireland and, if implemented, will be seen as an attempt by Taoiseach Leo Varadkar to counter criticism that his tax policies focus on higher earners.
A move to increase the threshold at which people enter the higher rate of income tax to €50,000 from its current rate of €35,300 was announced at the Fine Gael Ardfheis last November and has been criticised by other parties.
In the weeks leading up to that ardfheis, staff from the offices of Mr Varadkar and Minister for Finance Paschal Donohoe discussed tax policy plans, documents released under Freedom of Information show.
Officials in the Department of Finance were asked to draw up details of how to increase the level at which people hit the higher 40 per cent rate of income tax to €50,000; how to bring the earned income tax credit for the self-employed and the home carer tax credit, increased in recent budgets, up to the same level as the €1,650 tax credit available for PAYE workers; and how to introduce the unused tax credit refund.
“Would it be possible to cost a Refundable Tax Credit that would apply to low-income workers who don’t qualify for the PAYE or personal tax credits?” one email asked, adding that this should be for people earning €16,500 a year or €317 a week.
“Essentially this would mean that the ‘un-used’ part of the tax credit would be paid at the end of the tax year by Revenue.”
Sources said no final decisions had been taken yet on whether the plan would be included as party policy in a general election. It is understood the party may also move to cap the benefits of any tax cuts for higher earners.
If a low-income worker does not earn enough to use up their full allocation of tax credits, they would not benefit from any increases to those credits. Refunding the unused credits would see the Revenue repay eligible workers at the end of the tax year.
The documents were released to Michael Pidgeon, a Green Party candidate in Dublin City Council’s southwest inner city ward in the local elections in May.
Unaffordable tax policies
Mr Pidgeon said Mr Varadkar's tax policies were unaffordable at a time when there was a housing crisis.
“Fine Gael has presented itself as the party of prudence,” he said. “The documents show that is pure fiction.”
He said the €3 billion cost of the top rate tax changes was more than the annual housing budget.
While it is understood that the Department of Finance has concerns about the tax credits policy, sources said Fine Gael needed to offer tax cuts to lower income workers, as well as those on middle incomes.
Although the documents do not detail an exact cost for the refundable tax credits policy, it is said by sources to be greater than the €140 million estimated by Social Justice Ireland.
However, the benefits of the policy outlined by Social Justice Ireland – with the majority of refunds being less than €2,400 a year, with most being between €800 and €1,000 – are said to be broadly correct.