Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I move amendment No. 6:

In page 6, to delete lines 21 and 22 and substitute the following:“(a) in paragraph (a), by substituting “€1,100” for “€550”, and

(b) in paragraph (b), by substituting “€1,100” for “€550”.”.

The proposal by the Government to equalise the self-employed tax credit with the PAYE tax credit is one that is to be welcomed. We called for it last year and the Government began that process then. We see the second stage of it this year. However, it falls short of what was expected and what could reasonably be delivered upon. It should have been equalised on a three-year basis, with the second year coming up to €1,100. The question is really about the pace through which we deliver the equalisation process. I want to also mention that the tax credit should not apply to higher income earners.

We have had an amendment ruled out of order but I will put forward a different version of it on Report Stage. The amendment should state that we would begin to taper out the tax credit at income of €100,000 at a rate of 5% per €1,000 earned above that level with no credit being available to those who earn incomes in excess of €120,000. The tax credit would begin to taper out, losing 5% for each €1,000, which means there would be no tax credit at all when one's income is €120,000. This is a system I am sure the Minister is familiar with; the eradication, phasing out or tapering of tax credits at the higher level was introduced in Britain a number of years ago. It was introduced by the Labour Party when it was last in office. It is a way of clawing back revenue.

We have these debates in Ireland that frustrate me. We all know how we can use data. We talk about high marginal rates of tax. If we were to taper out personal tax credits for incomes above €100,000, our proposal is that we should increase personal tax rates at a rate of 7% on income above €100,000. The exact same objective could be achieved by eradicating personal income tax credits by tapering them out above that level, which would mean that marginal tax rates would not have increased, yet individuals would have paid more tax, the same way it happens in Britain. That is why when we compare marginal tax rates, it is important that we look at what is in the system - the types of pension tax relief, the fact that personal tax credit are tapered out and so on. That is another debate for another time. The issue here is that the tax credit should be introduced at €1,100. It was wrong for the Government to take a €950 approach. The Government should consider the tapering out of this tax credit starting at €100,000 and tapering it out at 5% for each €1,000 earned above that amount.