Fine Gael tax cut proposals will create a ‘race to the bottom’, says Labour

Finance Minister Paschal Donohoe has flagged plans to raise the point where people pay the top rate of income tax to 40,000 euro, over three years.

Paschal Donohoe (Niall Carson/PA) (PA Wire)

Plans to cut taxes by up to 600 euro a year by widening income bands have been branded a “race to the bottom” by the Labour Party.

Fine Gael’s Finance Minister Paschal Donohoe has flagged plans to raise the point at which people pay the top rate of income tax to 40,000 euro, over three years.

He raised the entry point for the top rate by 1,500 to 36,800 euro in the last budget, in a move that will take effect in January, and has signalled that further increases are on the way.

Fine Gael is clearly spooked and is now involving itself in a populist, tax-cutting race to the bottom

Ged Nash

But Labour’s finance spokesman Ged Nash criticised the proposals, saying they were “wrong for our economy and society”.

He added: “The minister’s pledge to embark on a tax-cutting crusade is the wrong thing do.

“It is a transparently populist attempt to buy people’s support with their own money.

“This money would be better spent on making education free and on cutting hospital waiting lists.

“The timing of the minister’s intervention is interesting coming after a very bad poll for Fine Gael

“Fine Gael is clearly spooked and is now involving itself in a populist, tax-cutting race to the bottom to match Sinn Fein’s wildly irresponsible carbon, property and USC slashing binge.

Labour TD Ged Nash (Cate McCurry/PA) (PA Archive)

“At a time when we should be broadening and strengthening and modernising the tax base, some seek to narrow it.

“We’re in danger of having a race to the bottom here.

“We all know that what the Irish economy needs now is additional investment in areas like housing, health, infrastructure and climate adaptation, not tax cuts worth a few euros a week.

“These are the points being made by the Irish Fiscal Advisory Council. This tax-cutting stuff is more reminiscent of the dangerous policies pursued in the early and mid 2000s.”

Mr Donohoe told the Irish Independent: “We have the ability to get to around 40,000 euro for the higher rate of tax and that means repeating the kind of moves that we have made in the recent Budget.

“I believe that’s going to allow more workers to pay the standard rate (20%) on more of their income, which I believe is an essential recognition of the efforts their work is making to grow in our economy.”

But Mr Nash said the proposals undermined Fine Gael’s position as the party of fiscal prudency.

“It will be difficult to take Minister Donohoe seriously when next he talks about the size of the national debt or the need to control public spending,” he said.

“What we need now is an honest conversation with the Irish people about what our economy, our creaking public services and our under-financed climate policy requires over the next decade rather than try to cynically buy them off with short-term tax cuts.”