Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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To ask the Minister for Finance if he will provide the increased revenue figures that would result from increasing the effective tax rate on the top 5% of earners from the current rate of 36% to 50% and the top 10% from 33% to 40%. [44303/12]

Michael Noonan (Limerick City, Fine Gael)
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I am advised by the Revenue Commissioners that the full year yield, estimated by reference to 2012 incomes, that would result from increasing the average effective tax rate of the top 5 % of income earners from the existing average rate of 36% to 50%, would be of the order of € 2.9 billion. The corresponding full year yield from increasing the average effective tax rate of the top 10% of income earners (which clearly includes the top 5% of income earners referred to above) from the existing average rate of 33% to 40%, would be of the order of € 1.9 billion.

The Deputy should note that to increase the effective tax rate to 50% and 40% for the top 5% and 10% of income earners respectively would mean having to increase the top marginal rates of tax significantly and would also involve restricting access to the basic tax credits and tax bands as well as all tax reliefs in addition to the restrictions that are already in place for certain categories of higher income earners. The top marginal rates of tax are currently 52% and 55% for PAYE workers and self-employed respectively. While it is not possible to be precise the top marginal rates of tax would increase to in excess of 70%.

The marginal tax rate is described as the tax rate that applies to the last euro of the tax base. Marginal tax rates are important because they influence individual decisions to work more or indeed to work at all. The OECD working paper Tax and Economic Growth indicates that “there is also the possibility that high top marginal rates will increase the average tax rates paid by high-skilled and high-income earners so much that they will migrate to countries with lower rates resulting in a brain drain which may lower innovative activity and productivity” . Higher marginal tax rates for earners may also incentivise a greater level of tax evasion and contribute to the development of a shadow economy.

The Deputy may wish to note that the top 5% of income earners earn 24% of the total gross income and already pay 43% of the total income tax and 39% of the total income tax, USC and PRSI. While the top 10% of income earners earn 35% of the total gross income and pay 59% of the total income tax and 53% of the total income tax, USC and PRSI.

The yield figures are estimates from the Revenue tax-forecasting model using actual data for the year 2009 adjusted as necessary for income and employment trends in the interim. These are, therefore, provisional and likely to be revised. In addition, it should be noted that Gross Income is as defined in Revenue Statistical Report 2010.