Róisín Shortall (Dublin North West, Social Democrats) | Oireachtas source

I wish to speak to amendment No. 70, which is about income tax. Looking at the impact of the permanent changes in the budget, the reality is there are big issues in relation to the distributional effects of what is being done in tax, which will result in those changes being very regressive. In the last decade or so, successive Ministers have prided themselves on the fact that we have a genuinely progressive income tax system but the tax changes that were introduced in this budget would reverse that - they will make it regressive. It is impossible to see a justification for what has been done around income tax, where changes were made under the heading of indexation. Indexation is supposed to relate to wage increases. There is a case and justification for indexing the tax bands to allow for wage inflation but not to allow for overall inflation. That has been a problem. It is also a misrepresentation of what our tax system actually does. I have heard more than one Minister, including very senior Ministers, refer to the fact that we need to index our tax system to allow for inflation. We do not. That is not indexation. They have also said people are paying more tax because of inflation. That is something the Tánaiste said. He said people on middle incomes, as he called them, are paying more tax as a result of inflation. They are not. They are paying more tax because of wage inflation. Wage inflation is quite low; I think it was about 2.4% in the year up to the budget.

There is no justification on any grounds, whether grounds of fairness, equality or progressivity, to index the higher rate of tax in line with inflation. All that does is give a tax benefit to everybody who earns over €36,800. What exactly is the justification for that? Why is the Minister doing that? He is giving a significant tax benefit to everybody who earns over that level. Why would he do that for people on very high incomes? For example, why should anybody in this House get a tax benefit? We do not have a difficulty. All our bills are going up but everybody in this House has the capacity to absorb that increase in the cost of living pretty well without it impacting on any of us too much. That is at the level of Deputies. Then there is the level of Ministers of State, Ministers, the Taoiseach and Tánaiste and so on. What is the justification for giving that tax benefit to people who are high earners? Beyond those in here, there are many people earning in excess of what the Taoiseach is earning, for example, lots of higher civil servants and the many people in the private sector who are earning, in some cases, multiples of what Deputies earn. I cannot see any justification for giving a tax benefit to people earning over €100,000.

In our alternative budget, the Social Democrats proposed a clawback. If the Government is going to index the higher tax band, and if it is serious about fair distribution and maintaining progressivity in our tax system, then it must have a clawback at the higher end. The Social Democrats proposed a third rate of tax at 43% that would apply to individual incomes over €100,000, with adjustments for married couples and so on. That is what is proposed in amendment No. 70. The Minister talks about fairness a lot. He has been under extreme pressure from his party leader, the Tánaiste, to do something even more unfair by introducing a 30% tax rate. I am glad he did not go with that, at least in this budget. All the signals indicate that the Government is going to further erode the tax base. The Minister made that point very clearly in his budget statement. He started a process of eroding the tax base and making it less progressive in this budget. For the life of me, I cannot understand what the justification is. What is the rationale for doing that? I would appreciate if the Minister could outline that.

My amendment, No. 70, requests that the Minister arrange for a report to be done and to report back to this House on the impact of this change, including who the beneficiaries are, how many beneficiaries there are and the income levels at which those beneficiaries get that benefit from the Government's move on tax. Then, the report would look at the principle of a clawback. I would have thought the Minister would accept, on grounds of fairness, that there needs to be some clawback if there is no rationale for giving away tax money to people. Would the Minister consider a clawback? Will he at least consider producing a report to see what the potential is for raising revenue from that? We would then know how many tax units we are talking about and what could be raised from the introduction of such a third rate of tax. That is the purpose of my amendment. I hope the Minister will give it serious consideration.

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