Richard Bruton (Dublin Bay North, Fine Gael)
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387.To ask the Minister for Finance the basis of calculation of the differential in the standard rate cut-off point between single persons, single parents and couples with one earner; when these differentials were last changed; and the levels that they would now be at if indexed to average earnings, or if indexed to the rise in the value of the single person’s SCP over the intervening years.[35862/24]

Jack Chambers (Dublin West, Fianna Fail)
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Table 1 below sets out the current value of the standard rate bands that apply to different household types:

Table 1 – 2024 Income Tax Standard Rate Bands

Prior to 2000, the income tax system allowed for full joint assessment of married couples. This meant that a married one earner couple could use the combined tax credits and standard rate band available to both individuals – i.e. double the personal tax credit and standard rate band available to a single earner. As a result, where the primary earner of a married couple had sufficient income to use the available reliefs in full, the second earner faced the marginal rate of income tax from the first pound of income earned, which acted as a disincentive to workforce participation for second earners.

A process of moving towards an individualised system of income taxation began in the tax year 2000/2001 with initial steps being taken to individualise the tax bands. The stated economic objective behind the move was to increase labour force participation and reduce the numbers of workers paying the higher rate of income tax. This was in line with other European countries who made similar moves towards a partial or fully individualised income taxation system on grounds that it improves equality and economic independence for women.

The current hybrid system has been maintained for over 20 years. Since 2001 up to €9,000 of the standard rate band can be transferred between spouses and the married personal tax credit, can be allocated in full to one spouse.

In lieu of fully transferable rate bands, a Home Carer Tax Credit may be claimed where one spouse works primarily in the home to care for a dependent person, such as a child. This credit was introduced in recognition of the choices made by families where one spouse stays at home to care for children or the elderly. In recent years, the value of the credit has been increased in line with a commitment in the Programme for Government and currently stands at €1,800.

Since 2014 a single parent may be eligible for the SPCCC. This credit also provides an entitlement to a €4,000 extended standard rate band.

Table 2 below sets out the estimate values of the single, married/civil partner one earner and the single person qualifying for the SPCCC, standard rate bands if these income tax bands had been index linked to average earnings. However, it is important to note that during this timeframe of over 20 years, the economy experienced many events, including an economic boom, global financial crisis, economic recovery and the Covid-19 pandemic for example. Therefore, the current levels of the standard rate bands reflect the policy choices adopted by various Governments in response to the prevailing economic circumstances and the fiscal resources available.

Table 2 – Income Tax Standard Rate Bands indexed to wages per head

It should be noted that the Department’s average wage forecasts are based on total employee compensation as per the CSO’s Quarterly National Accounts expressed on a per employee basis. This comprehensive measure based on employee earnings data from Revenue captures the average remuneration paid by employers to employees and includes wages and salaries as well as employer’s social contributions. In addition, the values provided are based on the Stability Programme Update 2024 average wage forecast.

Finally, if the married/civil partner standard rate band had been increased at the same rate as the single standard rate band, then the value of this standard rate band would now stand at €69,186. However, Government policy has been to maintain the €9,000 differential between this band and the single person standard rate band.