Bernard Durkan (Kildare North, Fine Gael)
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109. To ask the Minister for Finance the extent to which the burden of extra taxation imposed on Irish taxpayers at the height of the economic downturn will be modified in future years; and if he will make a statement on the matter. [1809/16]

Michael Noonan (Limerick City, Fine Gael)
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In order to maintain the public finances on a sustainable footing, around €30 billion of consolidation measures, of which €11 billion were revenue measures, were implemented over a seven year period.

The policies successfully implemented by this Government have seen the restoration of a strongly growing economy and this has been reflected in both our improved fiscal position and strengthening labour market.

To underpin this recovery, to make it more attractive to return to work, to stay in work and to ensure work rewards individuals adequately, the Statement of Priorities issued by Government in July 2014, included a commitment for an income tax reform plan to be delivered over a number of budgets. This undertook to reduce the marginal tax rate on low and middle-income earners, in a manner that maintains the highly progressive nature of the Irish tax system. The first stage of the plan was given effect in Budget 2015, when a suite of Income Tax and Universal Social Charge (USC) measures were introduced.  

The measures announced in Budget 2015 were the first steps to reducing the burden placed on Irish taxpayers, particularly for middle-income earners who have borne the greater share of the cost of the economic downturn, and this process continued in Budget 2016.

In Budget 2015, I reduced the top rate of income tax from 41% to 40% and extended the standard rate band on which income tax is chargeable at the lower 20% rate by €1,000. I also made a number of changes to USC, including reductions in the two lower rates of USC.

Budget 2016 continued this process of reducing the tax burden on low and middle income earners including, among other changes, a decrease in the three lowest rates of USC which took effect from January 2016. In total, Budgets 2015 and 2016 have reduced the three lowest rates of USC from 2%, 4% and 7% to 1%, 3% and 5.5% respectively. The changes to the income tax system included in these Budgets mean that individuals who paid Income Tax and / or USC in 2014 saw a reduction in their tax bill in 2015 and should see further reductions in 2016, where incomes remain unchanged year-on-year.

 Ireland already has one of the most progressive income tax systems in the developed world. To preserve that progressivity, the 8% rate of USC introduced in Budget 2015 has acted to limit the benefits from the Budget 2015 and 2016 tax packages to income of up to €70,044 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.

Looking to the medium term, in order to enhance transparency, the Budget sets out the indicative amount of fiscal space which future governments can decide can be used for additional expenditure increases or to fund tax measures.