Mr. Eamon Murphy:

Dr. Healy has covered most of what I wanted to say in mentioning the tax credit. Our preference is for available resources to be used for investment and improving social infrastructure and public services, we understand there is occasionally political pressure to introduce income tax cuts. Unfortunately, most of the proposals we have heard from the current Government have been targeted at people who are on above-average wages or significantly higher than that. Part of the reason for moving from a system of tax allowances to tax credits almost 20 years ago was to create a system whereby the Government would have the mechanism to introduce fairer tax cuts across the board, meaning everybody receiving a cut would receive it at roughly the same amount. That is why we believe any decrease to income tax should come through the tax credit system, rather than tinkering with bands and rates, which typically only benefit people on higher incomes.

This brings a need to introduce a system of refundable tax credits. I do not have a screen behind me as I normally do when I talk about this but I could show the committee a table from our analysis of last year's budget demonstrating the effects of the welfare and tax changes on people of different incomes. It shows a very interesting trough effect, with people earning between roughly €15,000 and €20,000 received almost no benefit whatever in the last budget. The reason is that without refundable income tax credits, the Government does not have a mechanism by which it can target that population. Bringing in that system of refundable tax credits would mean that everybody would benefit from a change in tax credits, regardless of income. That is in contrast to the current system, where people earning below €16,000 or €17,000 are benefitting very little or not at all.