The 9 percent VAT rate should be raised to drive up hotel prices and new tax breaks should be introduced for people who want to renovate empty houses, the parliamentary party Fine Gael has heard.
This is because concerns have been expressed in the party about the lack of participation in meetings by faction members, while disillusionment within the organization is growing.
A senior party TD said: “It is telling that TDs and Senators are not showing up to meetings and are more concerned with attending local events to keep their seats.”
Another source said: “If Leo doesn’t put a Fine Gael stamp on this budget, it could be the end for him.”
Parliamentary party Fine Gael held a lengthy discussion on fiscal priorities on Tuesday, with members outlining a range of demands ahead of the announcement in October.
Backbenchers called on the party leadership to introduce a budget aimed at tax cuts for middle-income earners, who pay a significant amount in tax but feel they get little in return.
Dublin Rathdown TD Neale Richmond said tax cuts of €5 a month would not be enough in the coming budget. He urged Treasury Secretary Paschal Donohoe to ensure more could be done for the pressured middle classes, who feel they pay for everything but get nothing in return.
Former cabinet minister Michael Ring said more needs to be done for working people, who pay much of their salary in taxes through USC and PRSI.
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Dublin Rathdown TD Neale Richmond said tax cuts of €5 a month would not be enough. Photo by Steve Humphreys
Mr Ring also raised the issue of the rising cost of private transportation due to record diesel and petrol prices.
Meanwhile, former agriculture minister Michael Creed called for more subsidies and tax breaks for people who want to renovate derelict properties in rural communities.
Fine Gael Senator Martin Conway said hotels in Dublin are price-inflating customers and should be forced to pay the full VAT rate. He said the cost of hotels in Dublin is “astronomical” and called on Donohoe to take action.
In the wake of the lockdowns caused by the Covid-19 pandemic, the government has reduced VAT on the hospitality industry from 13.5 percent to 9 percent.
Tánaiste Leo Varadkar also insisted that he is still pursuing his goal of introducing a third tax rate for middle-income earners.
Mr Varadkar said it is unfair that the average working person earns more than €40,000 but will lose 52 percent of any pay raise they receive – through income tax, USC and PRSI.
The debate comes at a time when unease within Fine Gael is growing as the party’s popularity continues to decline.
“We are at 19 pc and something drastic needs to be done,” said a TD.
Another senior party figure said: “Everyone in Fine Gael recoils whenever Paschal Donohoe comes on the radio because of all the doom and gloom he radiates.”
Meanwhile, Fianna Fáil’s parliamentary party has been briefed on the state of the economy by the Taoiseach’s economic adviser Alan Ahearne.
Mr Ahearne warned that the financial prospects for the country are “highly uncertain” and said a range of potential problems are looming over the winter months.
However, he said the country is in a strong position economically to withstand the pressures caused by the record levels of inflation and stressed that public finances are in good shape.
He said there are strong arguments for the introduction of a “rain day fund” over concerns about the sustainability of corporate tax revenues.
He said the lessons of the 1970s should be looked at, and stressed that the pursuit of inflation will not handle the crisis well, but will worsen it.
However, he said targeted measures are needed to ease the burden of the crisis in the cost of living for those most in need of state support.