Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Question 17: To ask the Minister for Finance the progress that has been made on ensuring the minimum effective rate income tax rate of 30% is being met for high earners; and his plans to increase the minimum effective rate. [25630/12]

Michael Noonan (Limerick City, Fine Gael)
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The high earner's restriction for individuals on high incomes, who make significant use of certain specified tax reliefs, was announced in Budget 2006 and came into effect from 1 January 2007.

The restriction works by limiting the total amount of specified reliefs that a high income individual can use to reduce his or her tax liability in any one tax year. Prior to the introduction of this restriction, such individuals, by means of the cumulative use of various tax incentive reliefs, had been able to reduce their tax liability to very low levels or to zero.

The restriction, as introduced, was designed to ensure that individuals with adjusted income exceeding €500,000 paid an effective rate of tax of approximately 20% on that income. That objective was achieved in 2007, 2008 and 2009. Where adjusted income was between €250,000 and €500,000, a tapering system ensured that there was a graduated introduction of the restriction, with the effective rate of tax increasing towards 20% as adjusted income increased towards €500,000.

In Budget 2010, changes to the restriction from the 2010 tax year were announced. Those individuals with adjusted income exceeding €400,000 will, as a result, now pay an effective income tax rate of approximately 30% on that income, while individuals will now become subject to the restriction and the associated taper, where adjusted income is €125,000 or greater and where they claim €80,000 or more in specified reliefs.

The Programme for Government included a commitment to ensure a minimum effective tax rate of 30% for very high earners. The changes already made in Budget 2010 should ensure that this is achieved.

The report on the operation of the high earners' restriction in respect of the 2010 tax year is currently being compiled by the Revenue Commissioners. It is expected that this report will be presented to me and published on my Department's website later this year.

As indicated in my Budget speech last December, following the receipt of this report and analysis of its contents, I will decide whether any further change to the restriction is warranted in Budget 2013.