Taxes Set For 2009/10 Hike?

Although there was a plea yesterday that a hike in personal taxes should be a 'last resort', the Government and social partners continued their tough negotiations on the economy today and it has emerged that the 41% income tax bracket is likely to go up significantly in the next budget.

The Irish Transport Minister Noel Dempsey said on Wednesday that he believes tax increases should only be introduced "as a last resort in dealing with the current economic crisis".

Speaking in Dublin yesterday, Mr Dempsey said the Government needed to be careful not to make current problem any worse by taking more money out of the economy.

In spite of the plea, Government officials and unions were today focusing on the issue of taxation, and how this might form part of an overall package aimed at tackling the current economic gloom.

All of the senior taxation experts from the Department of Finance will be present to answer questions from the various social partners.

The Commission on Taxation has already been asked to look at all areas where it can raise tax revenue but the Herald understands that income tax has been singled out as the most obvious and easy target.

It has been given until September 2009 to complete a report on tax revenue, just in time for the 2009 budget.

The news came as the text of the 'Draft Framework for a Pact for Stabilisation, Social Solidarity and Economic Renewal' was agreed by the social partners last night and has now been made public.

Under the section on stabilising the public finances, it is accepted that changes will be made to the tax regime.

However, the document states that changes must be "fair and equitable with a higher proportion falling on higher incomes while minimising distortionary effects between different forms of tax".

The simplest form of raising extra taxes would be to raise the amounts paid by workers. Officials are not speculating on how much the higher tax rate could be raised, but it is thought that it could be as much as 5%.

But unions are expected to outline a tough stance on the issue today and will tell the Government what they would see as acceptable. They will resist any changes to the lower tax rate.

The Minister for Social and Family Affairs Mary Hanafin would only say they are "hopeful" of going to Cabinet on Tuesday with the proposals and she also said that the required savings cannot be made without looking at the cost of the public pay bill.

(BMcC/JM)