Mary Butler (Waterford, Fianna Fail) | Oireachtas source

I thank the Senator for raising this Commencement matter, which I am taking on behalf of the Minister for Finance.

As the Senator will be aware, the programme for Government, Our Shared Future, contains a number of specific commitments relating to income tax, specifically that:

from Budget 2022 onwards, in the event that incomes are again rising as the economy recovers, credits and bands will be index linked to earnings. This will be done to prevent an increase in the real burden of income tax, to prevent more low income workers being taken into the tax net because of no changes to the tax system and to ensure there is no increase in the number of people having to pay higher income tax and USC rates.

Significant progress has been made in achieving this commitment. For example, over the course of last two budgets the Government has increased the standard rate cut-off point for single persons by 13.3%, from €35,300 to €40,000, with commensurate increases for persons who are married or in civil partnerships. In addition, the main tax credits - personal tax credits, the employee tax credit and the earned income credit - were increased by €125 each or 7.6%, from €1,650 to €1,775. It is also worth pointing out that the earned income tax credit was equalised with the employee tax credit in 2021. The home carer tax credit was also increased by €100, from €1,600 to €1,700, in budget 2023.

To respond to the Senator's question on examining a 30% tax rate or an intermediate rate of income tax, the position is that the 2022 report of the tax strategy group, TSG, examined the issue last summer, setting out a broad range of policy and operational considerations, as well as the cost of such a measure and the potential number of beneficiaries. The resultant report can be located on the Department of Finance’s website.

As outlined by the Minister for Finance in budget 2023, it was decided that further analysis of the TSG report would be appropriate, as the Senator noted. In addition, and also signalled in budget 2023, the Government is committed to a review of the personal tax system having regard to the medium term. In this regard, on 8 March, the Minister for Finance launched a public consultation in respect of the review of the personal tax system. The terms of reference for the review were also published.

In broad terms, the review will encompass the following strong focus on the programme for Government's commitments relating to income tax and USC.There will be further analysis of the introduction of an intermediate or third rate of income tax, building on the work of the TSG last year, and further analysis of the recommendations of the Commission on Taxation and Welfare directly relevant to income tax and USC. The review will also encompass an international comparative analysis of Ireland's personal tax system against those of other jurisdictions.

Work on the personal tax review by officials in the Department is under way. As the Senator will appreciate, this work is ongoing. It would be premature for me to elaborate on the specificities involved. However, I assure the Senator that the personal tax review will further examine the option of introducing an intermediate or third rate of income tax, together with the other matters I have just outlined.