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

I am advised by Revenue that the number of those who will benefit from the increase is 1.07 million taxpayer units, which is 33% of our taxpayer base. That represents all taxpayers who are liable to income tax at the higher rate.

On the €30,000 figure, Deputy Doherty will be aware that the average effective tax rate on someone paying €30,000 is 14.2%. While no doubt they pay a lot of tax in their eyes, because someone who is on an income of €30,000 is being very badly affected by the change in the cost of living and inflation, at 14% of average taxation, the average level of tax that they pay is quite low as a share of their overall income. Therefore the ability of income tax changes to make a big difference to the take-home pay of somebody at €30,000 is limited because the average rate of income tax in the first place stands at 14%.

There are three reasons I made these particular changes to the standard rate cut-off point. First, someone who is on €40,000 almost certainly does not qualify for any of the additional payments that are made available through our social welfare system to help with the cost of living but someone on €40,000 is below the average level of income in our country, yet they are already on the higher rate of income tax. I believe it is really important at this time of higher inflation that we recognise those who are making such a contribution to our economy but will not participate in the broader changes that are being announced by the Minister for Social Protection. Second, looking at all the comparison of our tax code compared to our peers in the European Union and OECD, a key feature that I believe we should change budget-by-budget is that you pay the higher rate of income tax on an average level of wages in our economy. I do not believe that is appropriate and I think it should change. Moving it up to €40,000 is a step forward on that journey at a time when average income earners are really experiencing the kinds of pressures to which the Deputy very regularly refers. Third, the changes must be seen in the context of other changes that we are making such as on credits. Those ensure that 2.1 million taxpayers, 64% of all taxpayer units, benefit from the income tax measures that I have proposed.