Dáil Éireann Debate, Thursday - 16 January 2014
29. Deputy Richard Boyd Barrett asked the Minister for Finance in view of the recent acknowledgement to the EU Parliament in responses to its questionnaire on the troika programme that the lowest income bracket had been disproportionately affected by austerity measures under the programme, the policy measures he proposes to address this unfairness; and if he will make a statement on the matter. [1655/14]
View answerAs the Deputy will be aware, the response given to the questionnaire was referring to an assessment, recently published by the Economic and Social Research Institute (ESRI), of the distributional impact of the budgetary adjustments undertaken since the onset of the financial crises in 2008.
Over the full period from 2009 to 2014, the study found that all income groups experienced losses, but it continues to show that the highest losses have been borne by those in the highest 10 per cent of the income distribution.
While the ESRI’s assessment does suggest that the next highest losses have occurred in the lowest decile, the estimate of the effect on the lowest decile is strongly influenced by the changes to indirect taxes. As the best way to tackle poverty and inequality is to create jobs and reduce unemployment through economic growth, and evidence from the OECD shows that indirect taxes are less harmful than income taxes. Indeed, implementing this policy is bearing fruit with employment increasing by some 60,000 in 2013 to the third quarter and unemployment down to 12.4% from a peak of 15.1%.
Finally, the ERSI assessment indicates that the overall consolidation process from 2009 to 2014 has not been regressive and it is worth re-iterating that the OECD and the European Commission have shown that Ireland still retains one of the most progressive income tax systems in the developed world.
Looking to the future, the research of the ESRI will inform deliberations in advance of Budget 2015.
