Dáil Éireann Debate, Wednesday - 7 November 2012
49. Deputy Dominic Hannigan asked the Minister for Finance the analysis he has has undertaken to assess the number of persons who would voluntarily leave the country if the universal social charge was raised to 10% on earnings over €100,000; if he has any evidence that persons would leave if this was to be implemented; and if he will make a statement on the matter. [48851/12]
View answerIt is the standard practice for the Minister for Finance to review all tax expenditures and reliefs in the run up to the annual Budget. It is also a longstanding practice of the Minister for Finance not to comment, in advance of the Budget, on any tax matters that might be the subject of Budget decisions. However, in general, the marginal tax rate, which is described as the tax rate that applies to the last euro of the base, is an important consideration in the formulation of tax policy. Marginal tax rates are important because they influence individual decisions to work more. The OECD in its working paper ‘Tax and Economic Growth’ points to the “possibility that high top marginal rates will increase the average tax rates paid by high-skilled and high-income earners so much that they will migrate to countries with lower rates resulting in a brain drain which may lower innovative activity and productivity”.
It is also important to point out that higher marginal tax rates for earners may also incentivise a greater level of tax evasion and contribute to the development of a shadow economy.
Regardless of the state of the economic cycle, gross migration flows to and from Ireland are very large in comparative terms, indicative of the extremely open nature of the Irish labour market. By way of background, net migration turned rapidly from positive to negative between the years ending April 2008 and April 2010, evidence of the rapid response of workers to labour market conditions in Ireland during that period.
