Tax reductions from now on should focus on incomes at the lower end of the scale, Taoiseach Bertie Ahern told the House.
"There is no case for reductions at the top end. Obviously, the bands and allowances must be kept in line, as the Minister achieved in the last Budget. The reductions should help people who are working hard on incomes that are no longer low but which are relatively low compared to others." He said that all the programmes introduced over the past few years had achieved tax reductions for the lower-paid.
"This has worked very successfully. The proportion of taxes of those on the average industrial wage, which is approximately €32,000, has fallen dramatically from approximately 14 per cent eight years ago to approximately 6 per cent. This represents a considerable achievement in bringing about equity in the tax system, which means that the burden is now being shifted from those on the average industrial wage and the amount reduced considerably."
Labour leader Pat Rabbitte said he made common cause with the Taoiseach on the issue. "If he has any difficulty in the autumn putting through a budget that gives some relief to people on very low incomes, we will be happy to support him. However, his partners in Government have indicated that they wish to cut the top rate of tax for high earners."
Thanking Mr Rabbitte for his support, the Taoiseach said that in reducing taxes and, in particular, helping those on lower incomes, the Government had followed its programme faithfully.
Mr Ahern added that it was incorrect to say that the benchmarking process would fall through if the new social contract fell through. "I said that the benchmarking process for next year has already commenced. A preliminary report on it has already been produced."
Asked by Mr Rabbitte if benchmarking would continue, irrespective of whether the contract fell through, Mr Ahern replied: "Yes".
