Oireachtas Joint and Select Committees
Thursday, 27 May 2021
Committee on Budgetary Oversight
Fiscal Assessment Report: Irish Fiscal Advisory Council
Mr. Sebastian Barnes:
Broadly speaking, one would expect income tax to rise roughly at the same rate as wages if there is no policy change and the tax system is indexed. Instead, what we see is a very fast growth in income tax receipts relative to pay. That is basically where our concern comes from. One way to reconcile that would be if the Government chose not to index the tax system. That means as income grows, extra money is brought in if average taxes increase. That is what was done in the past couple of years. The programme for Government stated the Government would not do that if wages were growing in the years ahead. Therefore, the Department of Finance is implicitly assuming that is what will happen. We have tried to clarify that with the Department but it is not very clear what it has done. At face value, assuming the Department's forecasts for income and also assuming the programme for Government indexation goes ahead, these forecasts are incoherent. Mr. Casey will provide the exact numbers showing how much difference indexation makes each year.