Simon Harris (Wicklow, Fine Gael) | Oireachtas source

As the Senator said, we have this exchange regularly in this House and the Dáil and know one another’s positions clearly. I do not buy into the logic that if taxation was increased on something, it would yield more. While accepting that everyone has to pay his or her fair share and that the system has to be progressive, there is significant evidence to suggest that if we want more of something, we should tax it less. If we want more jobs and productivity in the economy, we should not hike up taxes, particularly when living on an island with two jurisdictions. If the Senator is in favour of a united Ireland and having an all-Ireland economy, having two very different marginal tax rates, whereby somebody in Northern Ireland pays a much lower rate than somebody in the Republic, would not be good for investment in the Republic and would not make much sense in the promotion of an all-Ireland economy. It is important to note that the top 1% of income earners pay 22% of the total income tax and universal social charge take. That is up from 21% last year and 19% the year before that. I am absolutely in favour, as is everyone in this House, of progressivity and people paying their fair share, but we need to ensure there are no unintended consequences.

The basis for the recommendation is having a report laid before the Dáil on the options for introducing a third rate of income tax of 47% on individuals’ income in excess of €100,000. The Government’s commitment is not to increase top marginal tax rates. A third rate of tax of 47% would increase the top rate of tax by seven percentage points. It would also have the effect of increasing the top marginal tax rate to 59% for employees and 62% for the self-employed. The Minister for Finance, Deputy Michael Noonan, discussed this proposal at length with Deputy Peadar Tóibín on Committee Stage in the Dáil. He expressed his concerns, supported by research from the Organization for Economic Cooperation and Development, OECD, that tax rates at such levels would be anti-competitive and could drive skilled workers out of the country at a time when we needed to battle to attract skilled workers and talents into the country and to stay here. His view is that this recommendation would damage rather than support the economy. Marginal tax rates influence individuals’ decision to work more or work at all. Higher marginal tax rates for earners might also incentivise a greater level of tax evasion and contribute further to the development of a shadow economy. As the Minister stated in his Budget Statement, it is his desire to have every worker progressively moving to a point where the marginal tax rate will not be more than 50% for all workers. We think this would make Ireland more attractive for mobile foreign investment and skills, including for returning emigrants and attracting and keeping skills in the country.