Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

The position is that the matter of refundable tax credits was looked at in some detail in 2002 by the working group established under the programme for prosperity and fairness. The group was chaired by the Department of Finance and included representatives from Irish Congress of Trade Unions, IBEC, various farming organisations, the community and voluntary pillar, relevant Departments and the Office of the Revenue Commissioners.

Notwithstanding the passage of time, many of the findings and conclusions identified by the working group remain relevant and valid today. The working group found that there were significant disadvantages with such a system. These included the potential negative impacts on the incentive to work, which needs to be a priority, as well as the impact on labour supply, labour force participation and overall productivity and output.

The Commission on Taxation and Welfare, in its 2009 report, also did not recommend the introduction of refundable tax credits. Furthermore, the annual cost of providing refundable tax credits would be extremely expensive. There would also be operational and technical issues.

Refundable tax credits can have a negative impact on the incentive to work and may be inconsistent with the objective of encouraging as many people as possible to join or remain in the workforce. In addition, I note the minimum wage increased from €8.65 per hour to €10.50 per hour, between 2016 and 2022, in line with the recommendations of the Low Pay Commission and in an effort to support those on lower incomes.

Furthermore, the income tax and universal social charge, USC, changes that the Government introduced in recent budgets will benefit those who currently pay income tax or USC, while maintaining the breadth of the tax base and the progressive nature of the tax system.

On the issue of equity, it should be noted that 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. This has been verified by the Economic and Social Research Institute, the OECD and the International Monetary Fund.

Finally, I reiterate that the Minister has no current plans to introduce a system of refundable tax credits.

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