Tuesday, 26 November 2019

Ceisteanna (169)

Éamon Ó Cuív

Ceist:

169. Deputy Éamon Ó Cuív asked the Minister for Finance the percentage of taxpayers who were exempt from income tax in each year since 2008 to 2018 and to date in 2019; his views on whether taxpayers should be required to pay income tax irrespective of income; and if he will make a statement on the matter. [48983/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

Ireland has one of the most progressive income tax systems in the developed world. A progressive system ensures that the burden of taxation falls most heavily on those with a higher ability to pay. It is my view that 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.

As regards the factual elements of the Deputy’s question, I am advised by Revenue that the numbers of taxpayers in each tax band, including those who are exempt from paying income tax, for the years 2008 to 2017 inclusive are published on Revenue’s website at the link: https://www.revenue.ie/en/corporate/information-about-revenue/statistics/income-distributions/income-earners-it.aspx

2017 is the latest year for which data are available.

Using the data in this published document, the percentage of taxpayer units that were exempt from income tax in each year from 2008 to 2017 is set out in the table.

Year

Percentage of Taxpayer Units Exempt from Income Tax

2008

42%

2009

44%

2010

45%

2011

40%

2012

40%

2013

39%

2014

39%

2015

39%

2016

36%

2017

36%

Regarding the Universal Social Charge (USC), the percentage of taxpayer units who were exempt from USC for the years 2012 to 2017 inclusive is published in a document on Revenue’s website at the link: https://www.revenue.ie/en/corporate/information-about-revenue/statistics/income-distributions/income-earners-usc-rates.aspx

2017 is the latest year for which data are available.

Using the data in this published document, the percentage of taxpayer units who were exempt from the USC in each year from 2012 to 2017 is set out in the table.

Year

Percentage of Taxpayer Units Exempt from Universal Social Charge (USC)

2012

27%

2013

28%

2014

28%

2015

30%

2016

31%

2017

30%

Revenue’s Post-Budget 2020 Ready Reckoner is available on Revenue’s website at the link: https://www.revenue.ie/en/corporate/documents/statistics/ready-reckoner.pdf Page 3 of the document shows that in 2020, 34 per cent of taxpayer units are projected to be exempt from income tax and 28 per cent are projected to be exempt from income tax and USC. These estimates have been generated by reference to 2020 incomes as calculated on the basis of actual data for the year 2017, the latest year for which returns are available, adjusted as necessary for income, self-employment and employment trends in the interim. The estimates are provisional and may be revised. They assume no behavioural change by taxpayers.

Prior to the introduction of the USC, the Irish income tax base had narrowed to a point where over 45% of income earners in the State were exempt from income tax and just over 13% were liable to the higher rate of income tax. When initially introduced in 2011, the entry threshold to USC was €4,004, with the result that just over 12% of income earners were exempt from a charge on their income. Notwithstanding the subsequent increase in the entry threshold from €4,004 to €13,000, of the three Irish charges on income (income tax, USC and PRSI), the USC currently has the broadest base. This is because, in general, entry into liability for the USC starts at income of €13,000 per year (compared with €16,500 for income tax and generally €18,304 (€352 per week) for PRSI). The USC base is broad because there are no credits and very few reliefs.

It is the Government’s position that earners start to pay the marginal rate of tax at too low an income level and it is committed to reducing excessive tax rates for low and middle income earners while also keeping the tax base broad. As a result of changes in recent Budgets, USC rates have been reduced to 0.5%, 2% and 4.5%.  The income level at which taxpayers begin to pay the higher rate of tax has also been increased by €2,500 and there have been increases in both the Home Carer Tax Credit and the Earned Income Credit.