Seán Kyne (Galway West, Fine Gael)
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388. To ask the Minister for Finance his views on the impact which limitations placed on tax reduction measures in the previous and other budgets can have on job creation and in creating a culture which may not reward initiative and work; and if he will make a statement on the matter. [32234/15]

Michael Noonan (Limerick City, Fine Gael)
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Maintaining a low tax burden on labour is key to incentivising labour supply and to preserving Ireland's attractiveness as a location for foreign and domestic capital to invest and create jobs.

The potential behavioural impacts of reduced taxes on labour are an important consideration particularly in light of the effect that lower labour taxes can have in incentivising participation in the labour market and increasing employment. Marginal tax rates are important to consider because they influence individual decisions to work more or indeed to work at all.  

Improving the growth-friendly nature of the tax system involves relying to a greater extent on taxes that are less harmful to growth including through shifting the burden from labour to other taxes. Research published in a Department of Finance staff working paper has shown the potential gains to Ireland in terms of GDP and employment from revenue-neutral shifts from labour taxation to consumption and property taxes.

A fair, efficient and competitive income tax system is essential for economic growth and job creation. I have long said that the burden of the income tax system in Ireland is too high and that I would seek to reduce it as soon as it was prudent to do so. The changes to the income tax system included in Budget 2015 mean that all those who paid income tax and/or USC in 2014, including pensioners, will see a reduction in their tax bill for 2015 where incomes are unchanged.

Ireland already has one of the most progressive income tax systems in the developed world, as shown by the OECD. To preserve that progressivity, Budget 2015 also contained USC measures which have the effect of limiting the maximum benefit from this package of tax measures to approximately €14 per week for any individual taxpayer, which means that those with very high incomes will only benefit to the same extent as those with more modest incomes.

I intend to continue to make it more attractive to return to work, to stay in work and to ensure that work rewards individuals adequately. I plan to reduce the tax burden on low and middle income earners in future budgets, subject to having the required fiscal space.