Richard Boyd Barrett
Ceist:324. Deputy Richard Boyd Barrett asked the Minister for Finance the estimated full-year cost of index linking tax bands to inflation; and if he will make a statement on the matter. [42164/22]
Amharc ar fhreagraThursday, 8 September 2022
Ceisteanna (324, 325)
Richard Boyd Barrett
Ceist:325. Deputy Richard Boyd Barrett asked the Minister for Finance the estimated full-year cost of index linking the existing tax bands to inflation in budget 2023; and if he will make a statement on the matter. [42165/22]
Amharc ar fhreagraFreagraí scríofa
I propose to take Questions Nos. 324 and 325 together.
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 economic recovery.
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 2022 in April, the Department projected headline and core inflation of 6.2 and 3.9 per cent respectively for this year as a whole. However, with many of the risks to the outlook outlined in the SPU having already come to pass, the annual rate of both headline and core inflation is expected to be higher.
The Budget 2023 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 Pre-Budget 2023 Ready Reckoner (dated September 2022) includes the estimated cost of indexation at 1 percent, 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 (Pre-Budget 2023), it is estimated that the cost of indexing only the income tax bands by 1 percentage point would be approximately €85 million in 2023 and €100 million in a full year.
Question No. 325 answered with Question No. 324.
Question No. 326 answered with Question No. 317.