Brian Lenihan Jnr (Dublin West, Fianna Fail)

A number of speakers referred to a loss of confidence among the international investment community. I am acutely aware of this and the need to restore that confidence is a top priority. I will put into context the deterioration in the public finances. Tax revenues last year were nearly 14% below 2007 levels with those tax heads most closely aligned to the housing and international financial markets being worst affected. Lower levels of tax revenue mean we are not collecting enough revenue to finance the level of public expenditure we have seen in recent years. As a result we are borrowing significantly to fund for day-to-day spending, as well as totally funding our capital expenditure through borrowing. In the absence of further policy action, a Government deficit in the range of 11% to 12% of GDP is in prospect for each of the years to 2013. That position is untenable.

In the first instance, we must eliminate borrowing for day-to-day spending. The first step towards that goal is the €2 billion savings, the details of which will be announced next week. Next year, we need to make a further adjustment of €4 billion and a proportion of that must come from tax. The Commission on Taxation will report in the early autumn and that report will inform our deliberations on next year's budget.

We need to broaden our tax base. The most recent projected Revenue data covering approximately 2.4 million income earners on their records shows that 38% are entirely exempt from income tax, and the top 20% of income earners pay 77% of all income tax. Of these the top 2.5% of income earners pay one third of all income tax, the top 6.5% of income earners pay a half of all income tax and the top 12.5% of income earners pay almost two thirds of all income tax. For the information of Deputy Shortall, that data shows how progressive the income tax system in the State is.

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