Mr. Cormac Staunton:

I will address a couple of points that were raised. On the subject of the most progressive tax system in the world, I want to make two points. Obviously, the number is available; it is published by the OECD. There are couple of points that are very important to understand about that number. It is measured by calculating the gap between the tax rate on two thirds of the average income and the tax rate on what is either one and two thirds or twice the average income - I cannot recall which is correct. Ireland has the biggest jump in the effective tax rate actually paid on the incomes. The reason we have the biggest jump is not because we have the highest taxes on people with twice the average wage but because we have lower taxes for people who have below-average wages. Our tax rates applicable to those on twice the average wage demonstrate that we are not in any way different from other countries. However, it is in respect of taxes at lower rates that we are different. This is where we get the big jump.

Another point to remember is that the measure does not account for taxes on incomes beyond one and two thirds or twice the average income. In other countries, the tax keeps going up with one's wage. One's taxes increase progressively as a percentage of one's income, including when one is on three or four times the average wage. In Ireland, however, the progressivity of our tax system flatlines because we have just two rates. Now, with the changes to the USC, one could argue that we have more rates but, up until the recent budget, there was really no difference in one's tax rate once one reached the threshold of €32,800. The new USC level results in a slight increase in progressivity, but not much. The curve of progressivity starts off low, jumps and then flatlines again.

I have outlined two reasons for the number. It is important to understand that.