MINISTER FOR Finance Brian Lenihan challenged Labour’s income tax policy. “Deputy Eamon Gilmore needs to face reality when he claims that the deficit target of 3 per cent can be met without examining any tax increases on incomes under €100,000.”

He said the increase to a 48 per cent rate for high-earners would only raise €410 million in the next year. “One of the great advantages of the multi-annual, four-year plan approach is that one projects tax revenues over a four-year period.

“If one thing is abundantly clear it is that a 48 per cent tax rate, which in addition to the current levy and PRSI systems, would effectively mean a marginal tax rate of 62 per cent, leading to a reduction in tax receipts in the subsequent years of the plan.”

Mr Lenihan predicted that the €410 million figure would decline over the four-year period as higher income tax earners, faced with a tax rate in excess of 60 per cent, fled the jurisdiction.

In essence, he said, Labour’s proposed strategic bank would compete with the two established banks and the State for increasingly scarce funding.

“Every euro the bank would attract would mean one less euro for existing banks and the State, which must now borrow €2 in every €5 spent on providing our public services,” Mr Lenihan added.

He said the Labour leader had cited a recent report identifying a claimed €11 billion of tax expenditures. “More than 90 per cent of these tax expenditures are the tax allowances from which all taxpayers benefit, such as the PAYE credit and basic income tax credits.

“It does not serve public debate well to misrepresent the basic PAYE credit or credits available to income taxpayers as in some way a tax shelter enjoyed by the very rich when they are a basic entitlement of every taxpayer.”

Mr Lenihan said his officials and himself would be available to the Opposition parties between now and the budget. He added that Mr Gilmore would be provided with all the figures he could reasonably want when they had been finalised.

“I can also guarantee one thing about the Government’s four-year plan: it will not lack credibility.”

An important element of the four-year plan would focus on structural reform, which was an issue that had not received the attention it merited in recent years because of the need to deal with more imperative matters.

He said structural reform was about making the economy, both the private and public sectors, work better.

“It is not enough to sort out the public finances and leave untouched the way the economy works, particularly, as is evident, when it is in need of change. We, therefore, have to take action to ensure our policies support the restructuring of the economy in the wake of the present crisis.”

He said announcing structural reforms in the four-year plan would have the immediate effect of adding further credibility to the macroeconomic and budgetary framework it contained.