Dáil Éireann Debate, Wednesday - 9 October 2024
72. Deputy Pearse Doherty asked the Minister for Finance the estimated savings on a first- and full-year basis of removing tax credits on incomes above €100,000 taking into account the tax changes announced as part of Budget 2025; and if he will make a statement on the matter. [40635/24]
Amharc ar fhreagraI assume the Deputy envisages that the removal of credits will apply to the personal tax credit, PAYE tax credit and the earned income tax credit, and that the credits will be removed in a tapered way, rather than a complete withdrawal of credits when income exceeds €100,000. Revenue have advised that they are providing their estimates on the basis that these credits would be tapered by 2.5% per €1,000, resulting in no benefit from these credits for those on incomes in excess of €140,000. It is further assumed that the tapering will apply on an individualised basis, that is, that the relevant income will be the incomes of an individual and not that of the taxpayer unit as a whole (jointly assessed cases are counted as one taxpayer unit).
I am advised by Revenue that their micro-simulation modelling tool, Tax Modeller (TM), is built to model scenarios on a taxpayer unit basis (i.e., including jointly assessed couples as taxpayer units). It is not possible to estimate tapering of tax credits on an individual basis for a projected tax year using TM. However, incomes recorded on historic tax returns can be used to estimate the potential yield associated with the tapering of tax credits. As 2022 is the latest year for which full tax return data is currently available to be analysed (i.e., for both PAYE and self-assessed taxpayers), Revenue have carried out this estimate requested in relation to the 2022 tax year.
I am advised by Revenue that the estimated additional first year and full year tax yield from the proposal outlined are €395m and €475m respectively.
It should be noted that although the values of the personal tax credit, PAYE tax credit and the earned income tax credit have increased since 2022, (as provided for in Budget 2023, 2024 and 2025), the 2022 values for the credits were utilised for consistency purposes in preparing these estimates which refer to the 2022 tax year.
