Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

Deputies will be aware that this amendment was put forward on Committee Stage and, while it was not discussed, relevant points were touched on in relation to the discussions we had around the USC. The Deputies' request refers to a report specifically relating to the impact of the USC on a socially just income distribution. However, an analysis of the impact of one taxation measure in isolation would be misleading. The taxation and welfare systems work in tandem to redistribute income between individuals in society and it is, therefore, appropriate to consider the system as a whole, rather than on an item-by-item basis. It is unclear from the text of the amendment proposed by the Deputies what specifically the term “socially just distribution of income” would encompass. The Deputies will be aware of the term Gini coefficient, which is the most commonly used summary measure of income inequality. It is a measure of the distribution of income, ranging from zero, which represents a situation where all households have an equal income, to 1, where one household has all national income. A common method of analysing the distributional impact of taxation measures is to compare the change in Gini coefficient between market incomes and disposable incomes, being, respectively, income before and after the redistribution of income through the taxation and social welfare systems.

The latest data from the OECD for 2013 shows that Ireland had the largest absolute reduction in the Gini coefficient between market and disposable income for the OECD countries for which data are available. A reduction in the Gini coefficient means that the distribution of income has become more equal. The Irish tax and welfare systems combined reduced the initial market Gini coefficient from 0.58 to a disposable income Gini of 0.31. The report also shows that more than one quarter of the reduction was attributable to the tax system, a proportion exceeded in only seven other OECD countries. The data also indicate that the absolute reduction in Ireland’s Gini coefficient due to the welfare system was the largest in the OECD. It shows that, compared to other countries, the Irish tax system is strongly progressive and that the tax and welfare systems combined contribute substantially to the redistribution of income and to the reduction of income inequality. When looked at over a slightly longer time period and taking a more limited sample of countries for which data are available, it is evident that Ireland’s tax system has consistently reduced the Gini coefficient, meaning that it has increased the equality of income distribution to a greater extent than is the case with tax systems in other OECD countries. Of interest is the finding that, both for Ireland and the OECD as a whole, the absolute contribution of the tax system to reducing market income inequality has been increasing since 2004.

With regard to reports, the Deputies will be aware that my Department has published a large volume of material this year, including the income tax reform plan which provided detailed information on the distribution of the USC, with an analysis of many other aspects of the income tax system. Taking these factors into account, I am not minded to expend resources on the production of the report requested by Deputies Paul Murphy and Richard Boyd Barrett and, therefore, I cannot accept the proposed amendment.

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