Michael McGrath (Cork South Central, Fianna Fail)
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89. To ask the Minister for Finance the policy position in respect of index linking income tax bands; the costing for index linking income tax bands from 2018; and if he will make a statement on the matter. [41151/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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I assume that in his question the Deputy is referring to index-linking the income tax standard-rate bands by reference to overall wage growth in the economy. My Department is currently developing projections for 2018 wage growth that will be contained in Budget documentation to be published on 10 October, but this work is still ongoing and, under the Fiscal Responsibility Act, all such macro-economic forecasts are subject to scrutiny by the Irish Fiscal Advisory Council before publication.

Accordingly it is not yet possible to provide a costing for index-linking the income tax bands to expected wage growth to 2018.  However, I am advised by Revenue that the pre-Budget 2018 Reckoner Ready, available at , shows on page 10 the cost to the Exchequer of a 1% indexation of a number of credits and bands in 2018. Further changes can be estimated on a pro-rata basis from the information shown.

As the Deputy will be aware, in the Programme for Partnership Government there is a commitment to continue a medium-term process of income tax reform, to reduce excessive tax rates for low and middle-income earners while maintaining the breadth of the tax base. The Programme for Government therefore includes a commitment not to index-link tax credits or rate bands. While elements of the income tax system have traditionally been adjusted in each Budget this has always been done in a targeted manner to concentrate available resources at particular areas of need, rather than as a more generalised pro-rata increase to all elements of the system.  It is my intention to continue this targeted approach in future Budgets. There is also the point that indexation of income tax bands, if undertaken on an automatic basis, would limit the budgetary flexibility of the Minister for Finance and the Government by effectively earmarking in advance resources for such a measure.