Failure by the Government to target £500 million in tax cuts to low and middle income earners would be "the kiss of death for any future partnership deals", a senior trade unionist has warned.
The president of SIPTU, Mr Jimmy Somers, yesterday said the claim by the Minister for Finance, Mr McCreevy, that PAYE tax cuts would fuel inflation would "not wash" with trade unionists.
The Minister had said cuts in PAYE tax, together with a sharp increase in house prices, could create serious inflationary pressures. "Linking spiralling inflation in the property sector and SIPTU's demand for a return of £500 million to the PAYE sector does not wash," Mr Somers said.
"Tax reform is essential in December's Budget to demonstrate the Government's commitment to partnership and tax equity. Failure to do so would put at risk any possible future deal (on pay)."
Failure "to recognise the unique contribution made by PAYE workers in creating the Celtic Tiger economy would be the kiss of death for any future partnership deals. Workers must be given tangible proof in their wage packets that they too are part of the partnership process.
"Virtually all economic commentators support SIPTU's demand for a return of at least £500 million in the next Budget. Tax returns to the Exchequer are running at over £700 million in excess of the Government's own expectations and most of that is coming overwhelmingly from PAYE taxpayers.
"Providing that tax reforms raise the tax thresholds and widen the tax bands so as to ensure that low and middle-income workers are the main beneficiaries, then there is no risk of the economy overheating. Everyone will benefit from such a formula."
He welcomed the fact that Mr McCreevy was at last taking seriously the union's repeated warnings about spiralling house prices, "albeit in an attempt to undermine our legitimate demands".
The Minister should tackle the housing problem as a matter of urgency. "This would be far more pertinent in preventing the economy overheating than baseless arguments about the effects of moderate tax reforms."