I propose to take Questions Nos. 73 and 74 together.
The projected cost/yield from indexation of income tax credits and bands for Budget 2020 will not be finalised until Revenue has completed and published its Pre-Budget 2020 Ready Reckoner, which is expected to be published in early Quarter 3 2019.
The most up-to-date information available at present is the Post-Budget 2019 Revenue Ready Reckoner . This includes a table showing the estimated cost of a 1% indexation of credits, rate bands and exemption limits for Income Tax and the Universal Social Charge. As per this document the total full year cost of a 1% increase in all the tax credits and thresholds shown is estimated at €187 million.
I am advised by Revenue that the full year cost of a 1% increase in the threshold at which workers enter the 40% income tax rate is €79 million.
Revenue have advised that these figures are based on projected 2019 incomes as calculated on the basis of actual data for the year 2016, the latest year for which returns are available, adjusted as necessary for income, self-employment and employment trends in the interim. The figures are provisional and may be revised. Revenue does not provide cost estimates beyond the tax year 2019.
Increases greater than 1% can be estimated on a straight-line or pro-rata basis from the information given.
The 2019 Stability Programme Update was finalised and published in April this year. It sets outs the Government’s updated macroeconomic and fiscal forecasts for the period 2019-2023, including price developments that impact price and wage inflation. As this document sets out, there are a number of different metrics that could be used for indexation, such as “core” inflation which is forecast to be 1.1% for 2019.
Utilising a purely technical calculation, by using this figure and the most recent Revenue Ready Reckoner , the estimated full year cost of indexing in the tax credits would be €205.7 million and the cost of indexing the standard rate cut off point would be €87 million.