The Deputy will be aware that the main channel through which resource redistribution is incorporated within the budgetary process is by means of our highly progressive income tax system. In its study published in January of this year, the ESRI found that Ireland’s tax system does the most in Europe to reduce household income inequality. It found that in 2017, the tax system lowered Ireland’s Gini coefficient for income inequality by one fifth, almost twice the average impact delivered by tax systems across the EU generally.
In addition, compared to the OECD average, Ireland’s tax wedge (a measure of tax on labour income) is lower than 23 of the 36 OECD countries considered as part of the OECD’s Taxing Wages 2020.
Indeed, both income inequality and wealth inequality have reduced significantly in recent years in Ireland, owing to the redistributive nature of our tax and welfare system. Data from the Household Finance and Consumption Survey, conducted by the CSO, indicates that the Gini coefficient for net wealth inequality reduced from 0.75 to 0.67 between 2013 and 2018, signalling a reduction in wealth inequality.
As far as my Department’s work in this area is concerned, officials actively conduct budgetary impact analysis from an equality perspective on an ongoing basis as part of the budgetary process. As part of the Budget documentation, my Department published a Distributional analysis of Budget 2020 tax and welfare measures using the ESRI’s microsimulation model, SWITCH. This analysis outlined the progressive nature of the Budget’s welfare and tax measures, showing that poorer households benefitted to a proportionately higher degree. My Department also conducts analysis of the distributive impacts of various tax proposals considered by the Tax Strategy Group each year. This ensures that the distributive impacts of tax policy considerations are highlighted as an input to the budgetary process ahead of Budget day each year.