Dr. Kieran McQuinn:

A couple of distinctions need to be made regarding the taxation burden. For instance, if we are talking about fully indexing the tax bands, we would broadly support that in respect of trying to ensure that people are not being penalised, because of the inflationary process, by going on to higher income tax bands. In that instance, fully indexing the tax bands would be desirable. It would certainly be the correct policy to pursue now. If tax rates are unilaterally cut, however, or even if people are moved on to lower taxation rates, to a certain extent that is almost the direct opposite of a targeted measure.

This is because it is universal and by itself will increase expenditure and discretionary spending across the economy. At this point in time, that is not what we think is advisable or desirable. This is why I think cutting taxes in that sense would not be the most prudent of policies. Fully indexing the tax bands, which involves maintaining the income levels to allow for the inflationary pressures, is a different issue but cutting the tax rate would contribute to inflationary pressures and would not be the most prudent action to take.