Peadar Tóibín (Meath West, Sinn Fein)
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64. To ask the Minister for Finance the cost of reducing the marginal rate of tax to under half of taxpayers; and if he will make a statement on the matter. [31454/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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Following clarification with the Deputy’s office, I understand that the question concerns the cost of reducing the marginal rate of tax to under 50% for all taxpayers.

Following the changes announced in Budget 2017, the top marginal tax rate for incomes up to €70,044 is 49%, comprised of 40% income tax, 5% USC and 4% PRSI. It should be remembered that as recently as December 2014, the top marginal rate of tax for a single individual on all income over €32,800 was 52%.

There are a number of ways in which the marginal tax rate for all taxpayers could be reduced to under 50%. Given its structure of rates and bands, changes to USC would be the most cost effective way of achieving this objective.

This could be done by:

(i) abolishing the 3% USC surcharge that applies to self-employed income in excess of €100,000, and

(ii) Reducing the 8% USC rate that applies to all incomes over €70,044 to 5%, to merge it with the existing 5% USC rate which applies on all income between €18,773 and €70,044

These changes would mean that the highest USC rate would be 5%, and it would apply on all income from €18,773. This would give a top marginal tax rate of 49% for all taxpayers, comprised of 40% income tax, 5% USC and 4% PRSI.

I am advised by Revenue that the estimated first and full year cost to the Exchequer of these changes is in the order of €411 million and €563 million respectively.

These figures are estimates from the Revenue tax forecasting model using latest actual data for the year 2014, adjusted as necessary for income, self-employment and employment trends in the interim. They are estimated by reference to projected 2017 incomes. They are provisional and may be revised. The Deputy may wish to note that a Ready Reckoner available on the Revenue website offers a range of scenarios and their costs for changes in Income Tax and USC rates.