Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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19. To ask the Minister for Finance in view of recent ESRI analysis of budget 2014, which stated that the budget hit the lowest income bracket hardest, if he intends remedial measures or adjustments to the budget to address this issue; and if he will make a statement on the matter. [1656/14]

Michael Noonan (Limerick City, Fine Gael)
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I would firstly point out that the ESRI analysis showed that the highest income decile was the hardest hit in Budget 2014 not the lowest income decile. Furthermore, notwithstanding the fact that the lowest income bracket was impacted significantly, I note that the ESRI’s research continues to show that the highest losses have been borne by those in the highest 10 per cent of the income distribution.

While the ESRI’s assessment does suggest that significant losses have occurred in the lowest decile, the estimate of the effect on the lowest decile is strongly influenced by the changes to indirect taxes. As the best way to tackle poverty and inequality is to create jobs and reduce unemployment through economic growth, and evidence from the OECD shows that indirect taxes are less harmful than income taxes. Indeed, implementing this policy is bearing fruit with employment increasing by some 60,000 in the first three quarters of 2013 and unemployment decreasing to 12.4% from a peak of 15.1%.

The ESRI also acknowledge some difficulties in their paper with capturing the effects of some of the budgetary measures likely to impact upon higher earners, particularly in relation to increases in DIRT and Capital Gains Tax. For this reason, we have to treat the results with a degree of caution.

The ERSI assessment indicates that the overall consolidation process from 2009 to 2014 has not been regressive and it is worth re-iterating that the OECD and the European Commission have shown that Ireland still retains one of the most progressive income tax systems in the developed world.

Looking to the future, the research of the ESRI will inform deliberations in advance of Budget 2015.