Written answers

Thursday, 17 January 2013

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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To ask the Minister for Finance his views on the initial assessment of Budget 2013 published by the ESRI in December 2012 and in particular on the ESRI's assessment that, like Budget 2012, Budget 2013 will take more from lower income groups than from higher income groups. [1773/13]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The process of fiscal consolidation has seen approximately €28 billion of budgetary measures put in place between 2008 and 2013. Taken as a whole, these budgets have been progressive in nature over the period and this is reflected in the ESRI’s analysis. While the ESRI report states that the budget had a larger proportional impact on the lowest income group than the higher income groups it should be noted that the difference is quite small at half a per cent. Indeed the report states that for the budget to impose an equal burden on high and low income groups the adjustment on the higher group would have to be 5 times that of the lower income group. In addition, some of the measures which their methodology was unable to take into account would have had a progressive impact on incomes. Changes to the USC, DIRT and capital gains tax are considered by the ESRI to be of a progressive nature. In addition, increasing capital gains tax limits the benefit accruing to those who have the capacity to translate labour income into capital income and thereby contributes towards a fairer tax system. The ESRI have also regarded the property tax liability that can be deferred by low income individuals or couples as reducing their disposable income in 2013. I disagree with this approach and as such I believe that the outcome for individuals in the lower deciles is likely to be better than reported by the ESRI in its analysis.

Finally, the yearly budgetary adjustments must be seen in the context of the overall Irish taxation system. Using tax unit data from the Revenue Commissioners it should be noted that the top 23% of income earners paid 77% of the total income tax take for 2011. In addition, our entry point to income tax is €16,500, which at 51% of the average wage is the highest entry point in the OECD. The next closest is Italy at 28%. This shows that despite the fiscal consolidation that has taken place over the last five years Ireland has maintained a highly progressive system of taxation. In its 2012 report ‘Taxing Wages’, the OECD acknowledged that the Irish tax system is one of the most progressive in the OECD for both single and married couples (with two children). This is commented on extensively in a paper published as Annex F to the Budget to which I would refer the Deputy.

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