The Government has agreed a potential watering down of the tax "individualisation" proposals of last December's Budget in the new social partnership deal, according to Fine Gael's finance spokesman, Mr Michael Noonan.
Mr Noonan said last night that while the text of the deal supports establishing a single standard-rate income-tax band for all individual taxpayers, it does not give a commitment to the radical increase in the size of this band proposed in the Budget.
The agreement says the value of the individualised standard-rate tax band "should be kept under review in the light of increases in income levels and the objective of ensuring that, over time, at least 80 per cent of taxpayers are not subject to the higher rate of income tax".
Nobody now earning less than £14,000 pays tax at the top rate. Mr McCreevy proposed to increase this to £17,000 this April and to £28,000 in April 2002.
The controversy arose because dual-income households would not pay top-rate tax on the first £56,000 of household income in 2002, while single-income couples would pay top-rate tax on everything over £28,000.
The Programme for Prosperity and Fairness (PPF) commitment to increasing the standard rate band "in the light of increases in income levels" would mean a 15 per cent rise to just £19,550 by 2002, Mr Noonan said.
However, the general president of SIPTU, Mr Des Geraghty, said Mr McCreevy's target of a £28,000 standard rate band was still valid if the target of ensuring 80 per cent of taxpayers pay tax only at the standard rate could be met. The trade union had never opposed individualisation, just how it was implemented, he said.
Meanwhile, the Fine Gael leader, Mr John Bruton, has pledged to reverse tax discrimination between dual- and single-income households agreed in the PPF. However, in a qualification of his unequivocal commitment in December to do this, he said yesterday this would be done "in an incremental way and as resources permit".
Mr Bruton said last night that as Taoiseach he would not take back any benefits given under the deal to dual-income households. However, he said that "in an incremental way, as resources permit" he would ensure that such benefits were extended equally to single-income households.
Mr Bruton's commitment to reversing Mr McCreevy's plan "as resources permit" appears to qualify his promise in December to "do everything I can to reverse the unfair and divisive change in the tax system contained in this Budget".
Labour's finance spokesman, Mr Derek McDowell, said last night that "contrary to widespread media reports, the new national agreement contains no specific commitment to take people earning the minimum wage out of the tax net . . . There is a specific commitment to the Minister's controversial individualisation package but only a pious aspiration to the low-paid," he said.
The commitment to the low-paid should take precedence over the Government's commitments on tax, he said. "Given that Minister McCreevy has prided himself on riding roughshod over the spirit of the previous agreements to deliver tax benefits to the less well off, I am surprised that he has not had to make a more specific commitment on this occasion," he said.