Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

Ireland has one of the most progressive personal income tax systems in the world, which plays a crucial role in the process of income redistribution along with our social welfare system. Our redistributive tax system has been acknowledged internationally by both the International Monetary Fund and the OECD. However, it is the Government’s position that workers start to pay too high a rate of income tax at too low an income level. We cannot hope to remain competitive if someone on a relatively low income and who decides to work a few hours overtime has nearly half that extra money taken in tax. Therefore, in last year’s budget I once again increased the entry point to the higher rate of income tax for all earners by €750 and reduced the third rate of universal social charge from 4.75% to 4.5%. The impact of these changes is that the top marginal rate on incomes up to €70,000 has been reduced to 48.5% and fewer people on incomes around the national average will have any income subject to the 40% rate of income tax. This is steady progress in reducing the income tax burden for low and middle income earners.

As I have stated on a number of occasions, I plan to continue this progress in the coming years within available resources by concentrating on increasing the level at which workers pay the higher rate of income tax. An increase to the standard rate cut-off point would cost €460 million per annum over five years. The implementation of such a change would need to be delivered year-on-year to take account of our economy's performance. This would have positive consequences for businesses and jobs in the domestic economy and I am committed to measures that positively benefit workers while also keeping the tax base broad.

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