For "too long" people on an average salary have faced "high rates of marginal taxation," according to the Minister for Public Expenditure.

Paschal Donohoe was speaking to Newstalk Breakfast in the lead-up to October's budget announcement.

Reports over the weekend suggested that Government will cut the Universal Social Charge (USC) rate from 4.5% to 4%.

This potential tax cut would save the average citizen about €235 a year.

Speaking to the show, Minister Donohoe did not confirm Government’s plan for the USC – noting that his key focus is on dealing with “the issue of those who are on a normal average wage within our country paying high rates of marginal taxation".

"Other budgets that I have done ... have included changes in both USC and personal taxation in terms of tax credits, or the entry point into the higher rate of income tax," he said.

'Too long'

Minister Donohoe said for "too long" taxpayers on a "very normal and average wage within our economy have high rates of marginal taxation".

"At a time in which employers are delivering wage increases to try to help with the cost of living difficulties that we have, I believe that you should not pay a higher rate of tax just because you get a wage increase," he said.

Paschal Donohoe and Michael McGrath. Picture by: Julien Behal Photography

The Irish Fiscal Advisory Council has warned against widespread tax cuts, saying it would cast serious doubts over the integrity of Ireland's fiscal framework.

Minister Donohoe said Government is looking at the "broader picture".

"We are aiming to deliver a surplus of €10 billion for this year," he said. "We're aiming to deliver further surplus next year of over €11.5 billion."

"The key point that IFAC has made for many years [is that] if corporate tax in particular increases, we should not feed that into day-to-day spending and our permanent tax reductions.

"That's what I have done. That's what Minister McGrath has committed to doing."

One-off measures

The Government has set aside a €6.4bn spending package for Budget 2024 – however that could rise to around €11.4bn if once-off measures like energy rebates and financial supports for businesses are taken into account.

Minister Donohoe said "no decision" has been made around one-off measures.

"We are many, many weeks away from doing that," he said.

Surplus

IFAC has accused Government of breaching its spending rules for the next three Budgets – something Minister Donohoe said was necessary in light of inflation increases.

"If you look at what our spending was going to be for next year, it was going to be that we would increase day-to-day expenditure by 5%," he said.

"We put in place that target at a time in which inflation was around 2% – inflation will be higher than 2% for next year, and we're looking to increase spending by 6.2%.

"So, it is ahead of the 5% target for next year by a single percentage point and a bit, at a time in which inflation is so much higher than we expected.

"We are doing all of that so that we can continue our investment in our economy and in our society year by year if we face another recession, or if our corporate tax receipts decrease again."