Mr Varadkar’s intervention follows the publication of the 2024 tax strategy papers, which did not explore his party policy of introducing tax cuts worth €1,000 for middle-income earners in October’s Budget.

Fine Gael caused tensions in the Coalition when three of the party’s junior ministers wrote an article in the Irish Independent calling for a significant tax package in the Budget that would put an extra €1,000 in workers’ pockets.

However, the Department of Finance’s tax strategy group did not examine how this could be achieved and also did not look at Mr Varadkar’s long-standing proposal of introducing a new third rate of tax at 30pc, which would also reduce the income tax burden on middle-income earners.

Mr Varadkar’s spokesperson said the tax strategy papers were a “non-exhaustive or incomplete list of options that Government can consider”.

“They do not represent anything more than that and should not be framed as anything more than that,” he added.

The spokesperson said the forthcoming Budget would have an income tax package that “rewards work by reducing the amount of income tax that people have to pay”.

“This will include further changes to the point at which the top rate of tax kicks in.

“Because of tax reforms made in the last few Budgets, introduced by Michael Noonan and Paschal Donohoe, someone earning €40,000 today pays almost €3,000 less in income tax and USC than someone earning €40,000 in 2014. That trajectory will continue in the forthcoming Budget.”

In the income tax strategy paper, two options for increasing the standard-rate income tax band were examined by officials.

The first was to increase the standard-rate band by €1,000, with the second option to increase it by €1,500.

Adjusting the standard-rate band by €1,500 would mean allowing people to earn an extra €1,500 at the 20pc tax rate before hitting the 40pc rate.

However, increasing the standard-rate tax band by €1,500 would deliver an income tax reduction of only around €300 a year for a single person, a married one-earner couple, or a two-earner couple.

The standard-rate tax band would need to be increased by around €4,000 in October to deliver anything approaching a €1,000 income tax break, along with €100 increase in the tax credits.

In last year’s Budget, the standard-rate band was increased by €3,200. This meant that people can now earn €40,000 before they move on to the higher 40pc income tax rate.



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