Séamus Healy (Tipperary South, Workers and Unemployed Action Group)
Link to this: Individually | In context | Oireachtas source

11. To ask the Minister for Finance given that the richest 10% and the poorest 10% pay approximately the same proportion of their income in all taxes, if he will urgently introduce tax reform measures which will ensure the richest 10% pay a significantly higher proportion and the poorest 10% pay a significantly lower proportion of their respective incomes in all taxes than is currently the case; and if he will make a statement on the matter. [1320/16]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I am informed by the Revenue Commissioners that the combined Income Tax and Universal Social Charge paid by the lowest 10% of income earners, approximately 240,000, results in an average effective income tax rate of approximately 0.12%.  The average effective income tax rate for the highest 10% of income earners on the same basis is approximately 31%. It is important to note that due to Ireland's highly progressive income tax system the effective income tax rate payable increases in line with an individual's income level, such that those on the highest incomes are liable to effective income tax rates of over 40%.

These estimates are provided by the Revenue Commissioners, based on estimates for 2016, using the actual data for the year 2013 (the latest year for which data are available) adjusted as necessary for income, self-employment and employment trends in the interim. They are provisional and may be revised.

I believe the Deputy may be referring in his question to other forms of taxation paid by individuals, including indirect taxes such as VAT and excise duties, and to research on indirect taxes relative to a person's current income.  In this context, it is worth noting that the cohort of people with lowest incomes includes those with other sources of support which can supplement their spending. As such, a measure of their indirect taxes paid as a proportion of their current income would not be appropriate, and a measure as a percentage of spending is more representative.

When taken as a proportion of spending, research indicates that indirect taxes are flat at 15% across the bottom six income deciles.  Taken together, a highly progressive income tax and effectively flat indirect taxes point towards an overall progressive tax system.

Deputies will also be aware that the VAT system in Ireland operates a number of reduced VAT rates to assist those less well off.  For example, there is a zero VAT rate on food, children's clothes and oral medicines.  In addition, many services are exempt from VAT such as transport, education, schools and hospitals.