The 1 per cent income levy on all incomes announced in the Budget will now not apply to those who earn the national minimum wage or less, Taoiseach Brian Cowen said today.
Mr Cowen made the announcement in the Dáil this afternoon, hours after the Government backed down on removing the automatic entitlement to medical cards for the over 70s.
During the October 14th Budget, Minister for Finance said the new levy would apply to all incomes and that 2 per cent would be applied for all earnings above €100,100. However, the Government has been forced into another climb-down today amid mounting criticism of the new levy.
The removal of those on the annual minimum wage of €17,500, about one-third of the workforce, is expected to cost some €50 million, which will have to be found from elsewhere.
The announcement follows a Cabinet meeting earlier today and a meeting with the Irish Congress of Trade Unions on Friday.
Ictu this afternoon gave a “guarded welcome” to the to the Government decision. General Secretary David Begg said: “While we had sought a higher threshold – at €11 per hour as opposed to the €8.65 minimum wage – it is clear that this move will benefit those on the lowest incomes, who have been excluded from the tax net as a matter of public policy for some time now.
“Obviously, they should never have been targeted in the first place and such an indiscriminate instrument such as the blanket one percent levy should never have been considered, let alone introduced.
“It is important that the principle of protecting the lower paid is maintained and this Government move goes some way towards meeting the demands Congress had put to the Taoiseach,” Mr Begg added.
However, trade union Unite claimed the reversal did not go far enough.
“The actions of this Government over the past seven days have been hard to stomach,” said regional secretary Jimmy Kelly.
“The collapse of the Government’s authority has been swift and is a reflection of the abysmal judgment that dictated the most swingeing cuts should be directed at those who could least afford to bear them.”
Mr Cowen is expected to leave for China later today to join a trade mission there. The Taoiseach delayed his departure by two days in an effort to sort out the medical cards controversy.
