Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I will respond to Deputy Murphy's question first. To deal with the whole issue of progressivity and fairness, we should have this discussion in the context of the fact that we have a very, very progressive and redistributive tax code in the first place. According to work done by the OECD we are the most progressive EU member state when it comes to the progressivity of our tax code and we are the third most progressive in the OECD. The Deputy will be aware of the information on the reduction in GNI coefficients, which is a measure for looking at the equality of income distribution within societies. Again, it shows that the combination of our tax and welfare code means that we have delivered the seventh largest reductions in market income within the OECD.

On the Deputy's question on what would be the effect of a model such as he proposed, I do accept that it would mean that for those who were on very high incomes, the progressivity or the rate at which they begin to pay more and more tax would accelerate. If one looks at those who are on high incomes one could make the case that for those people it is more progressive. I do think there are trade-offs between one's tax base and how progressive that tax base is. I think one is better off having a progressive broad tax base as opposed to what, I think, the Deputy is suggesting, which is that one would have many people not paying this tax at all and then, for those who are paying it, they pay it at a very progressive rate. The model the Deputy appears to be advocating here is a model that would make our USC code vulnerable all over again in terms of the number of people who would not be paying it.

In terms of the question posed by Deputy Doherty, the report that I published outlined ten different options on how integration between USC and PRSI could take place. The cost varied between €600 million and €1.2 billion per year if one is looking to keep revenue neutral. Because of all of that, it is going to be very difficult to make progress on that in the short term. In the short term, particularly with all of the uncertainty that we have, the main thing we will see in USC will be a variant on what we have done recently, which is either modest changes in rates or people paying different rates of USC on different rates of income versus what they are paying at the moment.