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Tax Code

Dáil Éireann Debate, Tuesday - 21 June 2022

Tuesday, 21 June 2022

Ceisteanna (168)

Pearse Doherty

Ceist:

168. Deputy Pearse Doherty asked the Minister for Finance with reference to the Programme for Government commitment that tax credits and bands will be index-linked to earnings, the data on which this earnings growth is based; if it is based on Central Bank projections of compensation per employee growth of 2.3%, 4.7% and 5.1% in each of the years 2022, 2023 and 2024 respectively in its latest quarterly economic bulletin; and if he will make a statement on the matter. [32161/22]

Amharc ar fhreagra

Freagraí scríofa

As 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.”   The Deputy will note that this commitment contains a proviso relating to the path for economic recovery.

In terms of earnings, 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 compensation of employees (or total remuneration paid to all non-agricultural employees by employers in return for work done), and compensation per employee (average pay per non-agricultural employee in the economy). A number of CSO publications inform the Department’s outlook, including the Quarterly National Accounts, Labour Force Survey, and the Earnings, Hours and Employment Costs Survey (EHECS).

Projections for earnings growth have been particularly complex in recent forecast rounds. The labour market was at the frontline of the pandemic, and a number of headline indicators were affected by the unprecedented impact of Covid-19 on the economy. This includes measures of underlying wage growth, which were distorted by compositional shifts associated with the sectors and workers most impacted by necessary public health measures.

As the Deputy will appreciate policy formulation will take place over the coming months, with the Summer Economic Statement (SES) setting out the broad economic and fiscal parameters for the Budget taking into account the overall macro-fiscal position. The Budget 2023 Economic and Fiscal Outlook will set out the labour market and earnings projections. It is within this context, and in particular these wage growth data considerations, that any new tax measures will be considered as part of Budget 2023 deliberations.

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