Dáil Éireann Debate, Tuesday - 27 June 2023
231. Deputy Richard Boyd Barrett asked the Minister for Finance the estimated full-year cost for index linking the existing tax bands to inflation in Budget 2024; and if he will make a statement on the matter. [31017/23]
View answerAs the Deputy will be aware, the Programme for Government, “Our Shared Future”, 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 because of no changes to the tax system and to ensure there is no increase in the number of people having to pay higher income tax and USC rates.”
In relation to inflation, the basis for the Department’s outlook are forecasts published annually in the Budget and Stability Programme Update (SPU). Both publications set out point-in-time projections for inflation. At the time of SPU 2023 in April, the Department projected headline and core inflation of 4.9 per cent and 4.4 per cent respectively for this year as a whole. For next year, headline and core inflation are projected at 2.5 per cent and 3.2 per cent, respectively.
The Budget 2024 Economic and Fiscal Outlook will set out the Department’s updated projections for inflation.
In relation to the Deputy’s request, I would point out that, page 9 of Revenue’s Post-Budget 2023 Ready Reckoner (dated October 2022) includes the estimated cost of indexation at 1 per cent, across the main tax credits and bands, as well as USC band rates and exemption limits. This information is available at the following link –
www.revenue.ie/en/corporate/documents/statistics/ready-reckoner.pdf
Based on Revenue’s latest Ready Reckoner (Post-Budget 2023), it is estimated that the cost of indexing only the income tax bands by 1 percentage point would be in the region of €85 million in 2024 and €100 million in a full year.
