Gerald Nash (Louth, Labour)
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95. To ask the Minister for Finance his views on the Economic and Social Research Institute, ESRI, post-budget analysis that suggests that permanent tax changes made in budget 2023 will disproportionately benefit higher earners; if he is concerned that full-time workers who are on the minimum wage will not see the full benefit of the planned 80 cent an hour increase in the national minimum wage due to the failure to entirely adjust all relevant PRSI and tax bands to account for this increase; his plans, if any, to address this issue on Committee or Report Stage of the Finance Bill; and if he will make a statement on the matter. [55838/22]

Gerald Nash (Louth, Labour)
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For full-time workers on the national minimum wage, a significant portion of the 80 cent an hour increase they will receive in July will be swallowed up. In the budget, the Government failed to adjust the relevant PRSI bands to account for the increase and to ensure the full increase would go into the pockets of those who benefit from the national minimum wage increase. There are no Committee Stage amendments to the Finance Bill to rectify this problem, although it may be addressed in, for example, the social welfare Bill. I have tabled an amendment to the Finance Bill on the matter. The Minister might first respond to the question and we can take it from there.

Paschal Donohoe (Dublin Central, Fine Gael)
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Our taxation system is among the most progressive in the OECD in that those on lower incomes pay less income tax as a share of their income than those on higher incomes. Budget 2023 included a significant personal income tax package, estimated to cost €1.13 billion. Overall, in all the measures contained in that tax package, it is expected 2.1 million taxpayers will benefit in different ways.

It is important to bear in mind, however, that tax measures form only one component of the budget. The Department’s analysis shows that the gain in the top five income deciles is mainly from direct and indirect tax measures, while welfare measures and the energy credit are responsible for most of the gains in disposable income for households in the bottom five deciles.

With the increase in the national minimum wage from €10.50 to €11.30 per hour from 1 January, those on the national minimum wage will be better off in overall net terms.

In addition, the ceiling of the band for the 2% rate of USC is increasing by €1,625 to €22,920. Similar to previous years, this policy measure is to ensure that a full-time worker on the minimum wage, who will benefit from the increase in the hourly minimum wage rate, will remain outside the top rates of USC. As the Deputy acknowledged, policy matters regarding adjustments to PRSI are dealt with in the social welfare legislation and are a matter for the Minister for Social Protection. However, I will pass this on to her.

Gerald Nash (Louth, Labour)
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That would be appreciated. It is something we intend to raise in the context of the Finance Bill and probably more appropriately, the social welfare Bill. Our own analysis, which has been confirmed by the Parliamentary Budget Office, shows that in terms of the national minimum wage, a worst-case scenario could see many full-time workers on the minimum wage lose more than 30% of the 80 cent per hour increase because no adaptation is being made with regard to the PRSI threshold. That diverges from what policy has been over the years.

In 2015, for example, significant moneys were made available to address the USC issue, which is being addressed this year as well. Money was also used to address the PRSI cliff-edge problem. This can, therefore, be rectified. I hope the Minister will use his good offices with the Minister for Social Protection to seek to do that. There is an issue here that needs to be addressed. The principle that as much as possible of the increase that goes to a full-time national minimum wage worker should be taken home is something everybody should accept.

Paschal Donohoe (Dublin Central, Fine Gael)
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I appreciate the point raised by the Deputy. I have made great efforts in changes I made to the USC to deal with the issue he identified. As he will know, changes in PRSI have other consequences of which the Minister of Social Protection will be aware. I have no doubt at all that she will give a clear and justified account of what is happening from a PRSI perspective. However, the reason we did make the changes in USC is to ensure that somebody sees his or her wages go up due to a change in the minimum wage and is not worse off as a result of an unchanged level of USC.

Gerald Nash (Louth, Labour)
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I will put on record, and various respective think tanks have said it as well, that PRSI parameters will remain unchanged, and that will increase the PRSI burden on a full-time minimum wage worker. The threshold for those earning below €424 is not changing. There will, therefore, be an impact. More than 30% of the increase will be swallowed up because the kinds of PRSI adjustments that ought to be made are not being made. We will continue to argue for that. That is frankly an injustice given that we know the bottom two deciles will be worst affected by the impact of inflation, notwithstanding the measures that have been introduced by Government. It is important, however. When we look at budget 2023, there is a bit of sleight of hand going on. There is an effort by Government to include the one-off measures and the measures of budget 2023. It describes the budget as being ethical and progressive but when we strip away the one-off measures, that is not necessarily the case for low-paid workers.

Paschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy knows, many of the institutes he is quoting regarding the progressive nature of our budget are the same institutions that are saying the measures we brought in should be temporary. The one-off measures should indeed be temporary in the hope that the cost-of-living pressures about which we are all concerned begin to change and moderate, and offer an opportunity then to change the level of support we have in place if things begin to improve and prices begin to moderate. I would, therefore, make the case to Deputy Nash that it is appropriate that in evaluating the progressivity of the budget, we include the one-off measures. As I told the Deputy in my opening answer, many other measures are contained in budget day that aim to make a difference to low-income citizens who need additional supports. They should be identified as well and we should not just focus on tax in isolation.