Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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23. To ask the Minister for Finance if in formulating his budget 2015 tax proposals, he factored in the overall impact of both direct and indirect taxes to ensure fairness; and if he will make a statement on the matter. [41768/14]

Michael Noonan (Limerick City, Fine Gael)
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As I outlined in my budget speech on 15 October, Budget 2015 is about securing the recovery, building it for the future and broadening it to families across the country. In formulating policies to meet these goals my Department has a number of procedures in place to assess the distributional impact of tax measures which help ensure their fairness.

These procedures include a distributional analysis of direct taxation measures across a range of income levels, family types, and case studies. This analysis was published in the Budget book and show gains to all household types. For example the analysis shows that a single earner on an annual income of €25,000 will gain €174 per annum; a married one earner couple on €35,000 will gain €174; while a married one earner couple with two children on €55,000 will gain €626 per year. These gains reflect the Government's commitment to helping those on lower and middle incomes.

Analysis of the taxation measures in the budget based on the ESRI SWITCH tax-benefit model indicates that all household deciles will gain from the income tax measures in Budget 2015. Some of these gains arise from the increase in the exemption threshold for the USC which had the effect of removing lower income people from the liability to pay USC (the second time the Government has done this). This means that all individuals with income below €12,012 will be entirely exempt from the USC. The Government also reduced the lower USC rates and increased their thresholds delivering further benefits to those on lower incomes and ensuring fairness.

At the same time, the benefits for any individual from the income tax package were capped by introducing a new higher rate of USC for high income individuals thus maintaining the progressivity of the system and ensuring that those on high incomes did not benefit over and above what is fair.

These changes occur against the backdrop of Ireland having one of the most progressive income tax systems in the OECD.

With regard to indirect policy changes my Department is cognisant of the effect of these types of taxes on those lower down the income distribution. However the number of indirect tax policy changes affecting households in this budget was limited. The increase in excise on cigarettes was motivated by the negative health outcomes of smoking, while the main increase in indirect tax revenue resulted from a technical change where VAT is charged for cross-border EU telecommunications, broadcasting and electronically supplied services.

The tax measures outlined above are not only designed to extend the recovery across economy but also aim to strengthen the recovery for the future. These reductions in tax have the effect of increasing the reward from employment. They lower the cost of employing people which will help create jobs. Indications from the ESRI HERMES macroeconomic model shows there could be up to 15,000 jobs created from the reductions in labour taxation when the full effect of the tax reforms that will be introduced over the next three years take effect.

Finally, I believe that creation of jobs for the unemployed remains a key element of promoting a fair and inclusive society. The measures I have implemented will go a long way towards achieving this.