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

I thank the Senators for tabling the recommendations on this very important topic. I sometimes think the best argument for making the case for what we have done is looking at what would have happened if we had not taken these measures. If we had not put in place these measures what would have happened is that as workers on average incomes within our country had received wage increases from their employers to help them cope with the rise in the cost of living, they would have seen more of those wages go on higher taxes because the higher wages would pull more of their income into the higher rate of income tax. There is a really good argument to be made that at a time when the Exchequer is seeing income tax go up from wages going up to help deal with the consequences of prices going up, we would share some of that higher tax revenue with those who are doing the hard work in the first place. That is what this measure does.

As Senators will be aware, we have a long-standing issue within our tax and social welfare system. There is a group of workers whose income is high enough that they do not qualify for any additional support through social insurance or social welfare payments, but not so high as to insulate them from the effects of the rise in the cost of living. Those are workers who are actually below the average level of wages within our country, which is €43,000 to €44,000. What the Government has done, I believe, is to send a very clear signal that we want to help those workers at this time of rising prices. I am confident that the Government can build on this progress in the time ahead. Of course, all of that is dependent on what the right decisions are and what is affordable, budget by budget. The Government has committed to a process whereby we will evaluate the case for a third rate of income tax. There is a lot of benefit and merit to that approach, because it means that we can use the resources of the country in a targeted way to focus, in particular, on those whose income is below the average level of income. However, it is equally understandable and necessary that the Government spends a bit of time evaluating that more. While we are evaluating that, we will continue to make progress on helping those who are on very average levels of income in our country by bringing forward this measure to move the standard rate cut-off point up to €40,000.

I have no doubt that if I had not brought forward a measure like this, the Government would be facing a very significant critique that people would be paying higher taxes for no other reason than their wages had gone up. I want to avoid that happening and I know the measures we have brought forward will make some difference and will help those who are on that level of income within our country. I believe the measures are affordable and I am confident that we can afford them in the years ahead. I believe the design of this, in particular in targeting those who are just below the average wage, is the right decision to make.