The Irish Congress of Trade Unions (ICTU) has warned that any tax cuts in the forthcoming budget would have to be funded by reduced public spending or increased taxes elsewhere. Its pre-budget submission says tax reform should instead come in the form of refundable tax credits, which would create jobs and make the tax system fairer.
A Budget for Jobs, Homes and Growth says spending cuts of €2 billion are not necessary to meet Ireland’s deficit reduction targets. Research by the union-backed Nevin Economic Research Institute suggests a €800 million adjustment is sufficient. ICTU says this should not come through spending cuts, and instead argues for a wealth tax, increased employers’ PRSI on incomes over €100,000, reform of capital acquisitions tax, and higher duties on tobacco, sugar, salt, saturated fat and online betting.
ICTU says increasing the standard rate tax band or reducing in the marginal income tax rate would not benefit the majority of PAYE workers. Meanwhile, the current system of tax credits has a limited impact for many low-paid workers because they don’t earn enough to use their full tax credit.
“The introduction of refundable tax credits would tackle this issue as the unused portion of their tax credits would be refunded to such workers. A study undertaken for Social Justice Ireland identified that 130,000 low-paid workers and their families would benefit from refundable tax credits,” said ICTU general secretary David Begg.
The submission also says household water charges should be limited to households with a combined income of over €80,000. “Access to water is a human right. Moving to a system of regressive user charges risks plunging vulnerable households into water poverty. The announced system of free allowances is insufficient to prevent households from falling into water poverty, as well as being an inefficient and expensive policy tool,” said Begg.
ICTU also urges the Government to allocate an extra €400 million to social housing, household benefits and mental health services next year. Launching the submission, Mr Begg welcomed a €300 billion EU-wide investment package, announced by incoming EU President Jean-Claude Juncker, which will be delivered through public-private partnerships, the EU and the European Investment Bank.
“There has been a private investment strike in Europe and the public sector has been unable to fill the gap because of debt. Public sector capital expenditure has all but disappeared in Ireland and we urgently need to reverse this trend,” he said.