UNIONS last night demanded a punitive 54pc tax on those earning more than €100,000 as one solution to the economic crisis — in a graphic example of the gap between them and the Government ahead of the Budget.

When combined with PRSI, income and health levies, such a rate would mean workers paying 63pc on salaries over €100,000. Those earning more than €175,000 would be hit by a combined 65pc tax rate as a higher income levy would kick in.

The plan places the union body at loggerheads with the Government after the unions were asked to offer alternatives to the proposed €1.3bn in public sector pay cuts.



Finance Minister Brian Lenihan has warned that unions are deluding themselves if they think state coffers can be replenished by tax increases.

The Irish Congress of Trade Unions (ICTU), who made the demand for the 54pc rate last night, claimed such a tax would help economic recovery. But ICTU admitted it could only provide “guesstimates” on the amount the new tax rate would bring in.

Talks between union and government officials on the €4bn in spending reductions will intensify in Government Buildings this afternoon.

The union umbrella group still wants the Government to string out the recovery period over a longer timeframe. And it is not proposing cuts to services or pay.

With unions primed for a series of demonstrations and strikes in protest over the Budget, ICTU secretary general David Begg reiterated his opposition to pay cuts and called for the new higher tax rate.

Having already introduced the levies this year, Finance Minister Brian Lenihan has repeatedly signalled he will not introduce new income taxes.

To raise €1bn in extra revenue from those on six-figure salaries would mean jacking up the tax rate to 63pc, Mr Lenihan said, or some 22pc ahead of the current top rate of income tax.

Last night, Tanaiste Mary Coughlan warned that the gulf between the private and public sectors was “hurtful”.

“Naturally we can appreciate that everyone is under a lot of pressure. What we are seeing is the differential between the public and the private sector, which I think is hurtful, and I think it would be best if everyone came together for the betterment of Irish society,” she said.

Gearing up for prolonged talks, Mr Begg said there had been an “extraordinary effort” to claim that all wealth in the country had evaporated. But he argued that the top 1pc of the population made €75bn during the boom era, and €1.8bn in taxes remains uncollected.

Mr Begg said it was unfair that someone earning €200,000 continued to pay tax at the same rate as a person earning below average industrial earnings.

“I think the most important thing in this is that there is a clear demonstration effect that the people who are best able to make the contribution are seen to do that,” he said.

In terms of wages, the proposal only says there “may be a case for wage moderation” in combination with policies to control other costs.

On cutting back on public services, ICTU claimed it made “no sense” and could “fatally undermine” services such as health and education.

“It is arguable that our health service has never recovered from the corrosive effect of the savage cuts imposed in 1980s,” the document said.

Suffering

“The level of suffering that will be experienced by the most vulnerable in the community if €1.3bn is cut in Budget 2010 will be traumatic.”

Central to the 10-point plan is the creation of a National Recovery Bond, which would fund specific infrastructural projects, providing construction employment.

In addition, ICTU called for the creation of a €1bn fund to promote the type of job-sharing initiatives pioneered successfully in Germany, other EU countries and Singapore.

But Exchequer figures, which are also due out today, will put both negotiating teams under further strain and pressure.

The tax take is expected to be down by 17pc or 18pc on last year’s €31.5bn take to October.

- Aine Kerr Political Correspondent

Irish Independent