SOME progress was made in framing £300 million in tax concessions at a meeting of the Cabinet sub committee on the Budget yesterday. Sources indicated, however, that the package would not be finalised until next week.
With up to £400 million in concessions on an annualised basis - which will be worth £300 million this year - being proposed by the Government, it is understood that the three Coalition parties are advancing different tax priorities in preparation for the general election later this year.
Fine Gael is pressing for a one percentage point reduction, at least, in the standard 27 per cent income tax rate, as well as a cut in the rate of PRSI. Democratic Left on the other hand, has expressed a preference for a widening of the tax bands and increased allowances. Labour is believed to be adopting a combination of its partners' positions.
With the publication of the Partnership 2000 programme before Christmas, offering between £900 million and £1 billion in income and corporation tax cuts over three years, the three parties are agreed on the desirability of front loading the concessions in the first year.
The Cabinet sub committee is hoping to conclude its deliberations early next week. This would enable the full package to be presented to next week's Government meeting. The Budget will be announced the following Wednesday, January 22nd, the day the Dail resumes after the recess.
Cliff Taylor adds:
Government sources say that the key issue is precisely whom the tax package will be aimed at. Fine Gael support for a one percentage point cut in the 5.5 per cent employees PRSI rate is based on a view that it will give a clear and substantial benefit to a group of low to middle income PAYE earners. PRSI is levied on income up to £22,300 a year although from the last Budget the first £80 earned each week is exempt.
However, the Democratic Left leader, Mr De Rossa, as Minister for Social Welfare, may resist lower PRSI, which goes to the social insurance fund, from which the Department makes payments.
Most sources, meanwhile, believe that the standard 27 per cent income tax rate will be cut by at least one percentage point, while the possibility of a two point cut is also on the agenda. The two point cut would become more likely if the employee PRSI rate is left unchanged. Increases in personal tax allowances and a widening of the standard rate income tax band are also on the cards.
The Government must also decide on a business tax package. There is some support for further reductions in the 38 and 30 per cent corporation tax rates, but such measures have still to be agreed and cuts in PRSI may an alternative.
