Dáil Éireann Debate, Wednesday - 5 July 2017
47. Deputy Catherine Murphy asked the Minister for Finance if he has considered the impact that potential income tax cuts will have on the ability to invest in vital public services in budget 2018; his views on the further erosion of the tax base; the way in which he plans to offset the potential exchequer losses from a proposed tax cut; and if he will make a statement on the matter. [31480/17]
View answerThe Programme for Partnership Government recognises the need to invest in public services and capital infrastructure to meet increasing demographic demands; to provide targeted expenditure increases for improvements focusing upon health, housing, education, disability, child care and development. It also recognises that capital investment in key physical and social infrastructure can support growth and continued job creation.
The programme therefore contains a commitment that budget measures will be introduced that will involve at least a 2:1 split between public spending and tax reductions. This commitment is also contained in the Confidence and Supply agreement with Fianna Fáil. The ratio of spending increases to tax reductions in Budget 2017 exceeded this target and was in fact over 3:1 in favour of expenditure.
The income tax base was broadened significantly in the crisis through the introduction of the broad-based USC but also through the curtailment or abolition of a range of income tax reliefs. In 2010 over 45% of income earners were exempt from income tax. At present it is estimated that circa 30% of income earners are exempt from USC with approximately 37% of earners exempt from Income Tax.
While the Programme for Government commits to maintaining the breadth of the tax base, it also recognises that high personal tax rates in Ireland discourage work and jobs and have a negative impact on our international competitiveness. Therefore, it contains a commitment for a medium-term income tax reform plan that keeps the tax base broad, while reducing excessive tax rates for middle income earners, and limiting the benefit for high earners. We must appreciate the value of retaining the incentive to work, to enable those who work hard to provide for their families and generate further economic growth through employment and expenditure in the domestic economy.
Furthermore, as the Deputy will be aware, changes to one particular tax, such as income tax, are not considered in isolation. They must be considered as part of the overall Budget process encompassing both revenue and expenditure measures and in the context of available resources. Any announcement in relation to changes to the income tax system would normally be made as part of the Budget and I am not inclined to diverge from this practice.
