Dáil Éireann Debate, Thursday - 28 April 2022
70. Deputy Ged Nash asked the Minister for Finance if a new 30% rate of income tax is being considered by the Government, as announced by the Tánaiste in March 2022; his views on whether the programme for Government pledge on income tax cuts is prudent in view of the recent Stability Programme update and within the current fiscal and economic context; and if he will make a statement on the matter. [21425/22]
View answerIt is normal practice for a number of issues and options in the personal income tax space to be examined or explored in the context of the annual Budgetary process.
This work may have regard to the prevailing economic circumstances and outlook as well as to Government Programme commitments and to any other matters which ought to be taken into account.
The Tax Strategy Group process provides a forum where elements of the work at official level can be set out. Matters in the nature of those mentioned by the Deputy may well be considered as part of the process.
The specific commitment on income tax contained in the Programme for Government states that “from Budget 2022 onwards, in the event that incomes are again rising as the economy recovers, credits and bands will be index linked to earnings. This will be done to prevent an increase in the real burden of income tax, to prevent more low income workers being taken into the tax net, and to ensure there is no increase in the number of people having to pay higher income tax and Universal Social Charge rates”.
The Deputy will note that the commitment contains a proviso relating to the trajectory of the economy.
The Department of Finance published its updated economic and fiscal forecasts in the Stability Programme Update earlier this month.
In light of the economic shock associated with the invasion of Ukraine, the Department is projecting a General Government deficit of €2.0 billion, or 0.8 per cent of modified national income for this year. A modest surplus of €1.2 billion, or 0.5 per cent of national income, is projected for next year reflecting the unwinding of Covid-related expenditure, although this will be offset by significant expenditure to support Ukrainian refugees fleeing the war. The projections for next year incorporate a tax package of €500 million as set out in last year’s Summer Economic Statement.
Risks to the central forecast are firmly tilted to the downside and, given the degree of uncertainty, the margin of error around these projections is sizeable, particularly the assumptions around the path for energy and other commodity prices.
Ultimately, Budget 2023 proposals for consideration by the Government, including those in relation to personal income tax, will be developed in a prudent manner consistent with economic circumstances.
