Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

Deputy Tóibín's argument only has validity if one believes in a society where everybody in the labour force gets paid the same.

If everybody in the labour force gets paid the same, when tax reliefs are applied, everybody will get the same relief. If we believe in a labour force organised on the basis that people with additional responsibilities, in promotional posts or who work longer hours have more gross pay, if we use income tax and universal social charge, USC, as the method of giving relief, it is self-evident that people on a higher income from a particular source will gain more than people on lower incomes. The budget has a number of policy instruments and by using a mix, we can change the distributional effects, as I outlined in the social impact study by the Department of Social Protection.

To return to the Deputy's point, taking the examples given of people who are low-paid or high-paid, currently a single individual employee on the minimum wage of €17,542 per annum pays income tax of €4.01 and universal social charge of €7.19 per week and is exempt from paying PRSI. This effective tax rate is therefore 3.3%. As a result of the changes introduced in the 2016 budget, a minimum wage worker will see an increase in gross income of €1,014 to €18,556. Despite this increase in gross income, the weekly universal social charge will reduce to €6.09 per week. A full-time minimum wage worker will see a 4.2% increase in net income as a result of the measures in the 2016 budget.

In contrast, a single employee earning €70,000 per annum currently pays €24,785 per annum or over €476 per week in income tax, USC and PRSI. After the 2016 budget, such an individual will see an increase in net income of 2%, less than half that of the minimum wage worker. The minimum wage worker will get an increase of 4.2% whereas the single person on €70,000 gets a 2% increase. The Deputy's criticism is only valid if he believes in a labour force where there is equal pay right through it, regardless of qualifications, responsibilities or hours worked. If personal taxes are reduced, the impact of a reduction in such taxes will be greater for people who pay much in personal taxes as against those who pay a little in such taxes.