Taoiseach Leo Varadkar has said that without tax reforms, lower income earners will increasingly have to pay more of their salaries at the highest tax rates.
Addressing the biennial delegate conference of the Irish Congress of Trade Unions (Ictu) in Dublin, he strongly defended proposals to cut taxes in some areas.
In a wide -ranging speech he also said the Government would take steps to tackle the gender pay gap.
He said there would be a citizens’ assembly established to look at ways of closing the pay gap between the earnings of women and men. He said new legislation would require employers to set out their plans in this area.
Mr Varadkar also said that free GP care would be extended to children aged seven and eight next year while the national minimum wage level would also top the “psychological barrier” of €10 per hour next year.
On Tuesday Ictu criticised Government plans for tax cuts describing the measures as a “sleight of hand” that result in workers and their families paying more for public services.
Mr Varadkar said Ireland was in general a low tax country but that there were some areas of unfairness in the tax system. "One of those unfairnesses is that people on pretty modest incomes pay some of their income, or even a lot of their income at the highest tax rate of 40 per cent."
He said the average person over age 25 working full time in Ireland earned €47,000 per year and they they “ paid quite a chunk of their income at the higher tax rate”.
“We think that is unfair and we would like to get to the point where someone earning the average wage does not pay any of their income at the highest tax rate and those who earn more than the average wage would pay less of their income at the highest tax rate.”
Mr Varadkar said if his proposals were not implemented “more and more people over the years are going to end up paying the highest tax rates because pay increases over time.
He said those already paying the highest rates would pay more of their income at the highest rates.
He said this would not only affect doctors, teachers, nurses and civil servants but also lower paid grades.
He said, for example, if the current pay recommendations for health service support staff were fully implemented, such lower -paid staff at the top of their scales would actually start paying the highest tax rates. He said this would certainly be the case if they did overtime.
The Taoiseach told union leaders that when campaigning for pay rises they should bear in mind that 60 per cent of increases secured would be lost to workers through pension levies and marginal tax rates.
The Taoiseach also told the conference that he strongly believed that home ownership should be at the core of the country’s housing policy.
He said he wanted to see people in their 20s and 30s aspire to own their own home.
He denied the Government had any ideological preference to buy or lease social houses from developers rather than building them itself through local authorities or housing trusts.
“This is merely a practical issue. Local authorities lost the ability and knowledge to build social housing and we are building that back up again. So every year we will increase the social housing stock and every year, as we can, we will increase the proportion of those built directly by local authorities and housing bodies, for that is our preference.”
Mr Varadkar also said the current pension system no longer added up and major reforms were needed.
He said the pension system was designed in an era of lower life expectancy and that it was sustainable for people to make small contributions throughout their lives on the basis that they would only be retired for a couple of years. However he said it was a different world now where people lived much longer. He said there was an enormous pension divide with two thirds of workers in the private sector with no coverage at all outside of the State pension.
He said he wanted to see everyone part of an occupational scheme by 2022.
