Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

99. To ask the Minister for Finance his plans in Budget 2016 to cut the top rate of tax in view of the fact that the Economic and Social Research Institute has stated that cuts in the top rates of tax or in the universal social charge would have a strong impact on households with incomes in the top 10%, but little effect on households at low and middle income levels. [24786/15]

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

A recent Economic and Social Research Institute, ESRI, report was unambiguous in stating that cuts in the top rates of tax or in the universal social charge would have a strong impact on households with incomes in the top 10%, but little effect on households at low and middle income levels. Despite that, this is the Government's stated position in the run-up to this year's budget. It is hardly news and is simply a long-established fact that the ESRI analysis of last year's budget showed that the bottom 40% were poorer as a result of the Minister's measures. Will the Minister take a step back and, in his budget planning, will he instead target policy to reduce and not increase economic inequality?

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I note the release of a number of publications by the ESRI as part of its annual "Budget Perspectives" series, which is a welcome part of the information base leading up to the budget each year. I assume the paper to which the Deputy is referring is "Exploring Tax and Welfare Options". The paper indicates that a reduction in the 8% rate of USC or a cut in the top income tax rate would result in the top decile of households having the largest gains in equalised disposable income. This is unsurprising as the households in lower deciles pay little or no USC or income tax at these marginal rates.

The ESRI points out that the estimates of the distributional impact of tax and welfare changes they provide are "static" impacts based on the technical assumption that behaviour does not change. Thus, the estimates only consider part of the benefit to those currently working and do not account for the effect that lower labour taxes can have in incentivising participation in the labour market and increasing employment. Increasing employment has been a key plank of this Government's policy.

As I have said on many occasions, a fair, efficient and competitive income tax system is essential for economic growth and job creation. I have long said that the burden of the income tax system in Ireland is too high and that I would seek to reduce it as soon as it was prudent to do so. Ireland already has one of the more progressive income tax systems in the developed world.As a result of the changes I introduced in budget 2015, all those who paid income tax or USC in 2014 will see a reduction in their tax bill for 2015, where incomes are equal.  However, to preserve the progressivity of the income tax system, the budget measures were specifically designed to ensure that those with very high incomes would only benefit to the same extent as those with more modest incomes. This was achieved by the introduction of the 8% USC rate for income over €70,044, confining the benefit of the reduction in the marginal rate of tax from 41% to 40% to earnings below that ceiling only. The maximum benefit from the budget 2015 package of tax measures was, therefore, limited to approximately €14 per week for any individual taxpayer.

Additional information not given on the floor of the House

The reality is that, because of the highly progressive nature of the Irish tax system, those on lower incomes pay very low levels of tax, particularly when compared to their counterparts in Europe. It should also be noted that, as a result of increases to the entry point to the USC introduced by this Government in budget 2012 and budget 2015, raising the entry point from €4,004 to €12,012 per annum, it is estimated that approximately 417,000 individuals have been exempted from the charge altogether. This means that 28% of all income earners are not paying any universal social charge at all. Furthermore, I also reduced the two lower rates at which USC is charged and extended the threshold before the 7% rate becomes chargeable up to €17,576 per annum.

The changes announced in budget 2015 were steps in a process targeting low and middle income earners, which seeks to ensure that we continue to have a tax system that is progressive and which rewards employment. I intend to continue to reduce the tax burden on low and middle income earners in this manner, subject to having the required fiscal space.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

The Minister said it is unsurprising that the ESRI report states the top 10% of earners in the country are the ones who will benefit most, not just from last year's package but from that which will be promised this year and yet he keeps on dressing the budget up as though it will support middle income earners. Let us call a spade a spade. The top 10% of earners are not middle income earners. Rather, they are high income earners and include people such as the Minister, the Minister of State and other people.

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

It includes Deputy Doherty.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Yes, it includes people who are above the average rate. Let us be clear and call it what it is. If the Minister wants to introduce a tax measure, he should nail his colours to the mast and be clear that the majority of the tax giveaway in next year's budget will benefit the richest in society. He had no problem doing that with Greece yesterday, when we saw an example of the Minister we have not seen since the days of the hepatitis C scandal. If this is the Minister's agenda, let us call it what it is. He should not dress up the measure as something different. The average personal income in this State in 2014 was €35,000 and the average household was €39,478. This measure will benefit the wealthiest dual income households in the State. Let us call this measure what it is and stop trying to pretend that it will mostly impact middle income earners.

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Sinn Féin is a high tax party and all of the bombast, rhetoric and personal remarks in the world will not get away from the fact that it is involved in fantasy economics and its proposals on a series of budgets do not add up. It is a tax and spend party and is entitled to take that position. It wants to raise taxes on everybody. Our position is different. We want to reduce taxes, in particular personal taxes. I do not need an analysis from the ESRI to tell me that if somebody pays no tax or USC, he or she does not get relief if I reduce USC or income tax. I do not need someone with a PhD in economics to tell me that. If one does not pay tax, a tax reduction will not affect one. We have taken a lot of people out of USC and are committed to increasing the 400,000 people at work who do not pay it to 500,000 in the budget. If one falls within those levels of income, then a USC reduction does not affect one. It gives one no relief because one does pay any USC.

The same applies to income tax. If one is not liable for income tax, one does not pay it. To ensure that there is a balanced and even distributional effect we have put a limit on the reductions in personal income taxes of €70,000. Anybody with an income above that is in the same position as someone earning €70,000. That worked out at about €14 a week last year. We will continue with somewhat similar measures on this occasion.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

This Minister can come into the House until the cows come home and peddle his mistruths about Sinn Féin's economic policies. He referred to increasing tax on everybody. That is blatantly untrue and, as Minister for Finance, he knows that to be untrue. Unless he is not reading any of our submissions, he will know that we do not want to increase taxes on low and middle income earners and that we want to reduce the tax burden by scrapping property taxes and water charges. Can the Minister not deal with the debate in terms of facts and figures and what I proposed today, which is that the ESRI did not state that if one has no tax liability one will not pay any tax? It stated the measure benefits strongly the top 10% of earners in Irish society, namely, the richest of the rich.

In effect, it means that two earners in a household, each earning €70,000, a total of €140,000, will benefit more. An income of €140,000 is €100,000 more than the average income of households across the State. This is the type of measure the Minister wants to introduce. Even the IMF stated that putting money back into the pockets of those who need it most is the best way to achieve economic recovery. This is not just about economic recovery, rather, it is about economic inequality, something to which the Government is completely and utterly blind. The last number of budgets is testament to that fact.

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The Deputy always forgets the difference between gross income and net income. A person with a gross income on PAYE at a salary or wage of €70,000 a year, which is using an example of someone who is very wealthy, pays more than €25,000 in personal income tax. Accordingly, the net income is less than €45,000. We are directing it from that level down. It is not from €70,000 down but €45,000 net down. That is where we are focusing on that category.

Above that, people still get reductions in their taxes arising from the measures in the last budget. They do so, however, at the same level as somebody on €70,000. The reason we adopted these policies is that if one taxes something, one tends to get less of it while if one relieves tax, one tends to get more of it. These taxes are taxes on employment. Our strategy has been successful. By reducing personal taxes and VAT from 13.5% to 9% in the hospitality industry, we have created in excess of 100,000 jobs since 2012. The object of our tax policy is to grow the economy and to create jobs. It is a macroeconomic instrument. It is not principally about giving money to certain people.