The State's largest trade union is to ask the Government to implement the income-tax cuts promised for the next two years, amounting to £500 million, immediately because of the higher-than-expected tax revenues being received by the Exchequer. Mr Des Geraghty, SIPTU's national industrial secretary, said the union would make this demand in talks with the Minister for Finance before this autumn's Budget. The very high income-tax receipts being collected by the Government "should be returned to the PAYE sector from whom they are being collected".
The Government now had much greater leeway than expected to reduce tax in the autumn Budget, and this leeway should be used to increase tax allowances and bands, which would benefit everyone, Mr Geraghty said, rather than to cut the top tax rate, which would only benefit 15 per cent of taxpayers.
Partnership 2000 had offered £900 million worth of tax cuts over three years, he said. Some £400 million had been given in the last Budget, leaving £500 million to be given in the next two.
But the much higher-than-expected tax receipts afforded Mr McCreevy the scope to give the remaining £500 million in the autumn Budget.
Mr Geraghty's call comes after Exchequer figures, published earlier this month, showed that the tax take increased by £1.1 billion in the first seven months of this year. The trend showed by this 15 per cent increase to a total tax revenue of £8.4 billion is expected to continue into next year.
Mr McCreevy attempted to play down expectations of greater tax cuts or increases in Government spending when these figures were published. The buoyant tax returns would only mean that debt-servicing costs would be reduced, he maintained. "The fact that we have a good bonanza has a minimal bearing on the future and on future years", he said.
But Mr Geraghty told The Irish Times yesterday: "The ESRI report supports the trade union argument that to go for tax reductions now would be a good strategy."
Writing in the ESRI's quarterly economic commentary, published last week, Dr Terry Baker of the ESRI said that in the light of the good economic forecasts the Government would have to err on the side of making sure the parties to the Partnership 2000 deal felt that the tax commitments in that agreement were met. This was necessary to ensure continued moderate pay claims and to guard against inflationary pressure.
Mr Geraghty said taxpayers saw the large increase in tax revenue and would become very frustrated if they did not get some of it back in tax cuts. This could lead to higher pay demands, which would fuel inflation.
Mr Frank Mulcahy, the director of ISME, which represents small and medium-sized enterprises, said last night that while he agreed that there was now extra money available for tax reductions, it should be used in a focused way.
At the moment there was a shortage of skilled labour in indigenous industry and there was wage inflation in some sectors. Simply putting £500 million into the economy in tax cuts could exacerbate these problems, he said.
He suggested tax incentives to enable indigenous employers to introduce profit-sharing schemes. These would make such employment more attractive to workers who might otherwise leave to work for multinational companies. He also called for more funding for the Techstart programme, which encourages skilled technology graduates to work for indigenous firms.