Finance Minister Michael McGrath has said that a 30% tax rate is still under consideration as he warned that this year’s budget will be “prudent.”
However, Taoiseach Leo Varadkar warned that the Government cannot be “too cautious” or else it will risk pushing people into poverty.
The ministers were speaking at the National Economic Dialogue (NED) which marks the start of the Budget 2024 process.
READ MORE: Ministers say there is 'no leadership issue in Fine Gael' as Varadkar denies he has lost support
Hundreds of stakeholders gathered in Dublin Castle for the talk shop to make their case for spending increases.
However, Minister McGrath played down suggestions that there will be a giveaway budget.
He said: “The Fiscal Advisory Council concluded that our budgetary stance for 2023 was appropriate and that we struck the right balance between supporting households and businesses and at the same time not adding unnecessarily to inflationary pressures.
“That reflects the decisions we've made to date and I’ve no doubt that in the decisions we make in the months ahead with the full support of the party leaders.
“It will be a prudent budget.
“But it will also seek to respond to the pressures that are there. But it will be within certain parameters.”
During his opening remarks at the NED, the Taoiseach warned that being too cautious with spending could “push more people into poverty or into financial distress”.
He continued: “There can be a cost to excessive caution. A pessimism bias is as much a risk as an optimism bias”.
“The financial crisis, Brexit, the pandemic and the inflation and energy crisis all have something in common in my experience.
“The worst impacts on our economy that were projected at the time didn't actually arise and we recovered more quickly than we projected or expected.
“If the Government takes an overly cautious approach in dealing with the cost of living crisis or climate crisis, it is making a conscious decision to reduce living standards and to do less.
“That's not something that I think we can stand over given our fiscal position.”
Mr Varadkar also vowed that the entry point for the higher rate of tax will be raised as part of October’s budget.
Fine Gael’s policy is to raise the 40% entry point to €50,000. However, the Taoiseach said that he could not say whether that would be achieved in the next two budgets.
Minister McGrath also stated that the proposition of a middle tax rate of 30% is still being investigated following a promise to examine the proposal last year.
He explained: “We are undertaking a review of the personal taxation code and that involves developing a new roadmap for the future of personal taxation in Ireland. That went out to public consultation and one of the specific questions that we posed as part of our consultation relates to the possibility of a third or an intermediate rate.
“No policy decision has been made yet as to whether or not we will introduce such a rate and if so when.
“That would fall to be considered now as part of the budgetary process.”
Public Expenditure Minister Paschal Donohoe said that he accepts that there are high expectations given the large surpluses available.
He added: “It's just so important with all of the risks that we are aware of and the changes that are taking place in the global economy that Ireland doesn't find itself caught out again for the second time in a generation.”
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