I propose to take Questions Nos. 197 and 202 together.
The Programme for Government “Our Shared Future” contains a number of commitments in the area of budgetary policy and taxation including a commitment to use both taxation measures, as well as expenditure measures, to close the deficit and fund public services if required. In doing so, the Government will seek to focus any tax rises on tax behaviours with negative externalities such as carbon tax, sugar tax, plastics. A key focus of the Programme for Government is to get people back to work as quickly as possible, in order to restore the public finances and enable the provision of better and more accessible public services on a sustainable and long-term basis. A stable and sustainable regulatory and tax environment and sound management of the public finances will allow investment in the infrastructure and skills required to enhance competitiveness.
Looking ahead, fiscal policy is based on a three phased response:
- During the initial phase, phase one, swift action was taken to introduce emergency measures aimed at protecting individuals and businesses during the initial period of uncertainty.
- The focus of the next phase of the response, is on ensuring that the economy returns to growth. The main concern in this recovery phase will be to get as many people back to work as quickly as possible and the State will have a role to play in that regard.
- Over the longer time, fiscal policy will be required to pursue a credible path towards budgetary sustainability; to provide confidence to businesses, the public and to demonstrate that Ireland is back on the right path again.
It is important to note that Ireland has one of the most progressive income tax systems in the developed world – the most progressive within the EU members of the OECD. A progressive income tax system means that those on higher incomes pay proportionately higher rates of tax than those on lower incomes. It is a broad-based income tax system, where the majority of income earners make some contribution but according to their means. As a matter of policy, taxation measures are reviewed on a regular basis as part of the annual Budget and Finance Bill process.
The Programme for Government sets out the commitments for the 5-year term of the Government which has just been formed. The immediate focus of Government is on a fiscal stimulus plan to introduce a package of measures that will build on existing measures in order to help kick-start the economy, safeguard jobs and protect people’s livelihoods. Therefore, as I have previously stated, the short-term focus is on supporting households and firms, to limit the medium term impacts on the economy and to lay the ground for recovery. In October, the Government will set out the medium term budgetary strategy to restore fiscal balance.