Skip to main content
Normal View

Tax Code

Dáil Éireann Debate, Thursday - 28 April 2022

Thursday, 28 April 2022

Questions (46)

Richard Boyd Barrett

Question:

46. Deputy Richard Boyd Barrett asked the Minister for Finance if he is planning any new tax measures to address growing income inequality in view of the recent reports of increases in senior executive pay; and if he will make a statement on the matter. [21447/22]

View answer

Written answers

Ireland has one of the most progressive personal income tax systems in the world, which plays a crucial role in the process of income redistribution. Our redistributive tax system has been acknowledged by the IMF, the OECD and the ESRI. A broad-based, progressive income tax system, where the majority of income earners make some contribution but according to their means, is the most fair and sustainable income tax system in the long term.

The ‘Gini coefficient’ is a standard measurement of income inequality used internationally, whereby 0 represents a situation where all households have an equal income and 1 indicates that one household has all national income. The position is that in Ireland, income inequality measured on the basis of disposable income using the Gini coefficient stood at 0.29 based on the latest OECD data for 2018. This figure is below the OECD average and points to the strongly redistributive nature of the tax and welfare system in Ireland.

The contribution of the tax and welfare system to enhancing income equality can be measured by the relative fall in the Gini coefficient between market and disposable incomes. The latest OECD data show that Ireland recorded the third largest fall in the Gini coefficient between market and disposable income (after Finland and Belgium), with most of this reduction achieved due to welfare measures.

In addition, the ESRI have shown that Ireland’s tax system does more than any other country in the EU to reduce the gap between market and disposable incomes.

In terms of the progressivity of the income tax system, the Revenue Commissioners estimate that in 2022, the top 1.6 per cent of income earners will pay 27.7 per cent of total income tax and Universal Social Charge (USC) receipts. Furthermore, just over 55 per cent of total income tax and USC receipts will be paid by the top 8.3 per cent of taxpayer units (those earning over €100,000).

It should also be noted that the suite of tax and welfare policy changes introduced in Budget 2022 are broadly progressive, with the gains from the package of direct taxes and welfare measures combined more keenly felt by those in the lower income deciles.

In the normal run of events, the issue of proposed increases to senior executive pay is largely a matter for individual employers. However, the Department of Finance monitors income inequality, particularly in the context of the distributional impact of tax and social welfare measures introduced as part of the annual Budget.

The broad economic and fiscal parameters for the Budget in the autumn will be presented in the Summer Economic Statement. It is within this context and the overall macro-fiscal position that budgetary options, including those relating to income tax, will be considered.

Top
Share