Fianna Fáil Spokesperson on Finance Michael McGrath has accused the government of trying to hide a sneaky €300m income tax hike, details of which are buried deep in the budget documents.
Deputy McGrath commented: “The Minister for Finance was keen to trumpet the €595m of cuts to the Universal Social Charge he announced on budget day but we have not heard a word from him in relation to the impact of the failure to increase tax bands and credits in line with inflation. In total the government is expecting to take in a record €19bn in income tax in 2016, €800m more than this year.
“The Economic and Fiscal outlook which accompanies the budget sets out the impact of budget tax measures. There is a cut of €595m in income tax which relates changes to USC rates / bands. However there is also a provision for €300m being raised from “non-indexation of tax system”.
“This is a stealth tax as it has the effect of raising government tax revenue without explicitly raising tax rates. Taxpayers will pay more tax as the income tax bands are not being adjusted to take account of expected inflation. According to the document the Department of Finance projects that inflation will be 1.2% in 2016. To protect taxpayers from the loss of real income from inflation the entry point for the top tax rate should have been increased by €400 for a single person and €800 for a married couple. The various personal and PAYE tax credits should also have been increased to mitigate the impact of inflation.
“Essentially the Minister for Finance is taking back half of the USC tax cut this way. The biggest losers are those earning around the entry point to the top rate, €33,800. Many extra taxpayers will be now pushed into the top tax bracket if they get a modest pay increase. I am calling on the Minister to clearly state how many more people will be paying tax at 40% as a result of his failure to index bands.”