Leo Varadkar (Dublin West, Fine Gael) | Oireachtas source

Thanks very much, Deputy. I am a very strong supporter of reducing taxes on income and taxes on work. I know some people believe that, when one reduces income tax or USC, one is somehow giving people money. I do not see it that way. I believe it is allowing people to hold onto more of the money that they earned in the first place.

We know at the moment, when we need to continue to attract jobs and investment from overseas and so many people are getting increments and pay rises and are now able to work extra hours, that we want to incentivise people. That means reducing the amount of income taxes that they pay. Over the last couple of years since we have managed to get the economy working for people again, we have been able to reduce income taxes. We took hundreds of thousands of people out of the USC net entirely when we were in government with Labour. Now, one third of people who work do not pay any income tax at all. In more recent years, we have really focused on reducing the USC and reducing the point at which people pay that highest rate of income tax. Just in the past three budgets, including the one just gone by, for the average person earning about €45,000, those cuts in income tax and USC are worth about €750 in a full year. For a couple on an average income, those tax and USC reductions are worth about €1,500 in a full year. That is not a huge amount of money, but €1,500 a year is probably a month's rent, probably a month's mortgage, probably a month's childcare, or perhaps a bit more than that. I think we can do better in the years ahead if we keep the economy growing, if we make sure that we manage the public finances prudently.

The Deputy's assessment that income tax reductions have to be paid for by tax rises elsewhere is not entirely true. I would argue that most of the money that we are going to get from VAT next year and most of the money that we are getting from stamp duty this year is going into additional public spending. If one looks at the entire budget package of €2 billion to €3 billion, the amount of that that comes from tax increases or discretionary revenue measures is a couple of hundred million euro. It is not as straightforward as just offsetting one from the other. Someone could equally argue that that money is going into health or that money is going into housing, for example.

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