Dr. Karina Doorley:

I will start with the Deputy's last point, relating to the issue of work incentives for secondary earners in a household. Typically, secondary earners tend to be women. They have the lower potential earnings for a range of reasons, including the gender wage gap, but also traditional divisions between work and caring roles. Most European countries are moving to a system of individual taxation from systems of joint taxation, or have been doing so for the past couple of decades. The reason for that is it provides a better incentive for the secondary earner in a couple to work, that is, either to join the labour force or, if he or she is already in the labour force, to work more hours, such as by moving from part-time work to full-time work.

Ireland began the system of switching to individual taxation at the turn of the millennium. There were a couple of budgets that steadily increased the standard rate band for two-earner couples and for singles while keeping constant the standard rate band for one-earner couples. The system of joint taxation turned into a system where just one third of the standard rate band was allowed to be shared between members of a couple. It became a sort of hybrid system, but it became more individual than joint. There is a measurable effect there. It increased the proportion of married women in the labour market by approximately five percentage points at the time, so it was quite significant. There is scope to do more. We are still in a hybrid system where, if the secondary earner in a couple is not working and decides to join the labour market after staying home for child-rearing duties or whatever, his or her marginal tax rate is higher than it would otherwise have been if we were in a situation of individual taxation. In the current situation, where there is a very tight labour force, a shortage of workers in certain key occupations and we are facing population ageing and so on, it makes sense to reduce barriers to work. It is not about forcing people to go to work if they want to stay home and care for children; it is about removing financial barriers to work for those who want to go to the labour market. The commission recommends individualising taxation and our research to date shows that is a sensible path to take.