PPF Pledges Put Irish Tax Cuts In Jeopardy

by Robert Lee, Tax-News.com, London

23 October 2001

According to a report from the Economic and Social Research Institute (ESRI), the Irish government will be obliged to switch resources from tax cuts to social welfare in its next budget if it is to meet the anti-poverty targets set out in its Programme for Prosperity and Fairness.

The report shows that because so many lower-income households are paying little or no tax, inequality can only realistically be reduced by spending increases in social welfare, income support, and child benefit. The ESRI study analysed the effects of tax cuts and increases in personal allowances on these groups: 'Even at half average incomes, the variations make a difference of only one tenth of one percent to the numbers in relative poverty,' concluded the report.

The ESRI says that almost £1 billion should be available up to 2003 above the cost of wage indexation, and argues that if at least half of this was spent on social welfare, the benefits would be spread more evenly than if the money was concentrated on making changes to the tax system. It would also help the government to achieve its stated intention of taking more Irish citizens out of the tax net.

However, the report also observed that assuming modest economic growth, there would still be enough resources to cut the top rate of tax to 40% over the next two years.

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