Michael Healy-Rae (Kerry, Independent)
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239. To ask the Minister for Finance when the changes to income tax announced in budget 2023 are coming into effect; and if he will make a statement on the matter. [61749/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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I assume that the Deputy has in mind the personal income tax package changes announced in the Budget.

Budget 2023 brought forward a significant personal tax package with an estimated cost next year of over €1.13 billion. The Standard Rate Cut-Off Point is being increased by €3,200 from €36,800 to €40,000 for a single individual (8.7% increase), with commensurate increases in the bands applying to married persons and persons in civil partnerships. The main personal tax credits (personal credit, employee tax credit and earned income credit) are also being increased by €75 from €1,700 to €1,775 (4.4% increase). The home carer tax credit is also being increased €100 from €1,600 to €1,700 (6.3% increase).

Further, the 2% rate band ceiling for USC will also be increased in line with the increase in the national minimum wage to ensure that a full-time adult worker who benefits from the increase in the hourly minimum wage rate of €10.50 to €11.30 will remain outside the top rates of USC.

Legislative amendments to give effect to the above personal tax changes, from 1 January 2023, are provided for in Finance Bill 2022, which is currently progressing through the Houses of the Oireachtas. It is anticipated that Finance Bill 2022 will be enacted before end-December and the personal income tax changes will come into effect from 1 January 2023.

Neale Richmond (Dublin Rathdown, Fine Gael)
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240. To ask the Minister for Finance his views on whether there is a need for tax bands to be linked to inflation given the current rates of inflation; and if he will make a statement on the matter. [61765/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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In general, no Government in Ireland has followed a policy of strict indexation of tax credits or rate bands, as this does not allow flexibility to adapt spending as necessary to the level of resources available to the Government for any given Budget. Such a policy could also potentially restrict the ability of the Government to target resources where the need is greatest.

However, as the Deputy will be aware, the Programme for Government, “Our Shared Future”, states that “From Budget 2022 onwards, in the event that incomes are again rising as the economy recovers, credits and bands will be index linked to earnings. This will be done to prevent an increase in the real burden of income tax, to prevent more low income workers being taken into the tax net because of no changes to the tax system and to ensure there is no increase in the number of people having to pay higher income tax and USC rates.”

Budget 2023 included a significant personal tax package with an estimated cost next year of over €1.13 billion, which effectively sought to index the Standard Rate Cut-Off Point and the main tax credits within the fiscal resources available. The Standard Rate Cut-Off Point is being increased by €3,200 from €36,800 to €40,000 for a single individual (8.7% increase), with commensurate increases in the bands applying to married persons and persons in civil partnerships. The main personal tax credits (personal credit, employee tax credit and earned income credit) are also being increased by €75 from €1,700 to €1,775 (4.4% increase). The home carer tax credit is also being increased €100 from €1,600 to €1,700 (6.3% increase).

Further, the 2% rate band ceiling for USC will also be increased in line with the increase in the national minimum wage to ensure that a full-time adult worker who benefits from the increase in the hourly minimum wage rate of €10.50 to €11.30 will remain outside the top rates of USC.

The measures introduced in Budget 2023 will ensure that every income-earner, paying income tax or USC in 2022, will see an increase in their net income in 2023, all other factors being equal.

With regard to cost-of-living increases, the Government is acutely aware of the cost pressures currently facing households and businesses and has responded to help alleviate some of this burden. Budget 2023 brought forward a package of €6.9 billion as well as €4.1 billion of one-off measures, which included, for example, the provision of energy credits for all households. This is in addition to €3 billion of measures that were implemented prior to the Budget.

The Government will continue to keep cost-of-living challenges under close review and to respond appropriately within the limits of available resources.