Dáil Éireann Debate, Thursday - 25 June 2026
5. Deputy Pearse Doherty asked the Tánaiste and Minister for Finance his views on the most appropriate way to deliver a fair tax package for workers that ensures an equitable distribution of the benefit. [48240/26]
Amharc ar fhreagraThe Tánaiste has made it public that he plans to bring forward tax cuts in this year's budget after leaving workers worse off in last year's budget. That is according not only to Sinn Féin but also to the Economic and Social Research Institute, ESRI. In the election campaign, the Government parties promised to bring forward tax cuts every year and broke that promise to workers and families. The fact that workers were left worse off last year is why it is even more important that any tax package for workers is fair and works for all workers. Does the Tánaiste accept we need a fair tax package? How does he see that being achieved?
I thank the Deputy for the question. The Programme for Government: Securing Ireland's Future contains specific undertakings with regard to personal income tax. It commits to implementing progressive changes in taxation if the economy remains strong, including indexing credits and bands to prevent an increase in the real burden of income tax while, in the event of an economic downturn or unexpected deterioration, there will be postponements to income tax credits or bands, as there were in budget 2021.
To ease the burden facing average and middle-income earners, over successive budgets the previous Government, of which I was a member, substantially increased the entry point to the higher rate of income tax for all earners by €8,700 or approximately 25%. The main credits have also increased by €350, or approximately 21%. In line with the Government policy of ensuring full-time workers on the minimum wage remain outside the charge to the top rates of universal social charge, USC, the ceiling of the 2% USC rate band was increased by €6,898, or 34%, from 2020 to 2025. Budgets 2024 and 2025 also cumulatively reduced the 4.5% rate of USC to 3%.
As the Deputy will be aware, Ireland has a progressive income tax system. It is estimated that in 2026 approximately one third of taxpayer units will be outside the income tax and USC net altogether and, therefore, due to the progressivity of our income tax system, account should be taken of this in any analysis or commentary.
A number of targeted measures were introduced in budget 2026, including mortgage interest tax relief, the rent tax credit and the 9% VAT rate on gas and electricity bills.
I published Ireland’s medium-term plan last December with the Minister, Deputy Chambers. It sets out a binding path for net public spending for the lifetime of this Government.
In the coming weeks, the summer economic statement will be published, which will outline the parameters for budget 2027, including the size of the tax package. Following the summer economic statement, as part of the budget process, my Department will conduct distributional impact assessments to analyse the impact of budget measures on Irish households. We will use the ESRI's tax benefit microsimulation model, simulating welfare, income tax, childcare and health policies, SWITCH, to model proposed tax measures to ensure their fairness. However, it is our intention to have a personal income tax package in the budget. We will outline the size of the tax measures in the summer economic statement. I look forward to debating them on budget day.
When Fine Gael has brought forward tax packages, they have always been two-tier tax packages, which means those on the higher end benefit more than those on the lower end. About half of the workforce benefits far more than the other half. A worker on €50,000 gets a tax cut multiple times larger than a worker on €40,000. I understand the challenges in adjusting tax bands and adjusting for inflation. It is not simple, but there are ways in which it is possible. For example, more focus on the USC and tax credits would make a far better impact for those on lower and middle incomes than simply dealing with the bands. Will the Tánaiste ensure that the half of workers who earn €44,000 or less get a fair tax package compared with people who earn €50,000, €90,000 or €300,000? The packages the Government has brought forward have been unfair in the past, in that the half of the workforce that earns less than that level of €44,000-----
Thank you, Deputy.
-----got far less than they should have.
I appreciate some of the Deputy's comments about the challenges that exist. We live in a country where one third of people pay no income tax or USC. When we talk about progressivity we have to acknowledge that fact. We can argue about whether it is a good or bad thing, but approximately one third do not pay any income tax or USC. That has to be factored into any comments on progressivity.
Second, the entry point to the higher rate of tax is still too low. I think it was €33,000 in 2015. It is now €44,000. It is still below the average. I look to colleagues in the Labour Party, including Deputy Nash. I have heard the comments of the Irish Congress of Trade Unions, ICTU, on this. It might suit Deputy Doherty to say "Oh Fine Gael", but it is ICTU that says the entry point to the higher rate of tax needs to be looked at. IBEC makes that point too. We need to make sure wage growth in the economy, and thank God we are seeing wages rise in the economy, does not get outstripped by the taxman taking all the benefit of it.
The detail of the package is entirely a matter for the Government to consider in the round. The Government has not decided it, but we should not dismiss - I am not sure the Deputy is doing so, in fairness - the threshold point.
I am not dismissing anything. What I am saying is that the Government has consistently brought forward tax packages that are two-tier. For example, the Tánaiste talked about the entry point to the higher rate. If that is focused on instead of USC or tax credits, there will be winners and losers. The winners will be the half of the population who earn more than €44,000 and the losers will be those who earn less than €44,000. What is the better way?
When I talk to constituents who earn €60,000 and would benefit from an increase to the entry point to the higher band, they do not really care whether it is the entry point to the band, or USC or tax credits. All they care about and know is that they are paying too much tax for what they are getting back. They want more money in their pockets at the end of the week, better services and all that. The fairest way to do that is to make sure the Government does not spend a large portion of what is available for tax reductions just on the workers who earn more than €44,000. USC is the best way to make sure there is an impact for all people. We have said clearly in our policy-----
Thank you, Deputy.
-----that the first €45,000 of income should be exempt from USC. That can be started in an emergency budget.
Thank you, Deputy.
It should be followed up in the October budget. These types of measures benefit all workers as opposed to a proposal that will benefit only some.
Another Thursday, another emergency budget. We cannot keep having calls for emergency budgets and mini-budgets every week. Come on. We just cannot. Will the Deputy please read the analysis from the Irish Fiscal Advisory Council and the Central Bank? To look for another budget every week-----
I am not looking for another budget. I am looking for one.
The Deputy is doing it again. The budget will be in around 100 days' time. We need to get into an annual budget cycle. We should have a good, decent, robust debate about what the best composition of that is. I look forward to that very much, but we have to stop with this idea of an emergency budget. We have to run the country in a sustainable way.
We should not look at how we assist people purely through the tax system. When the Deputy talks about lower income people, he leaves out of the analysis the social welfare system we have in place, the significant safety net it provides and the many supports some lower income families receive, including the working family payment and the largest increase received. There are people today, who are not wealthy people, who got up at a ridiculous hour in the morning, sat in horrific commuter traffic and are looking for a bit of a break too. They are annoyed, as are their trade union representatives and employers, at the entry point to the higher rate of tax being too low.
We have not made any decisions in the round on this, but we should not be getting into divide and conquer. There is a legitimate policy debate about the threshold at which the higher rate of tax is paid.
Of course there is a legitimate policy debate. That is what we are having.
The Deputy is dismissing it.
Now you are interrupting me.
Apologies.
That is the debate we are having. The reality is that some people win out more than others. That is also the reality. Let us not pretend that does not exist.
What I am saying is the best way to deal with it is through the USC. The people who earn €60,000 or €70,000 would benefit along with the people who earn €30,000 or €40,000, rather than if the Government overly focuses on the bands. I am not saying it should dismiss doing anything with the bands, but every time it has brought forward a package, it has been in that regard. That is why we need a fair budget.
I could stand here and remind the Tánaiste of his campaigning. I campaign for an emergency budget, but not a different budget every day. People need a cost-of-living intervention right now. They cannot wait until 1 January for tax adjustments to happen. That is legitimate. Do not tell me what I can and cannot do. I represent people who are pushed to the pin of their collar because of the Government's decisions and broken promises. Does the Tánaiste want me to remind him of them? One was that the Government would deliver a tax package every year for workers. It broke that promise. Remember the time the Tánaiste and Fine Gael paraded around with placards saying, "We will abolish the USC". Remember the pictures of that. That is another broken promise. I could list all that out, but what this question is about is delivering a fair tax package for workers-----
Thank you, Deputy.
-----to make sure the Government does not deliver the two-tier system it has previously------
Thank you, Deputy.
-----and to impress on the Tánaiste that the USC and tax credits are the best way to deliver a fair package.
The good thing about this country is that we have elections. We had two recently and the Deputy went to Galway extensively - he was there a lot - and told people to send Fine Gael a message, back the Sinn Féin emergency budget and vote for the Sinn Féin candidate and Sinn Féin lost the election, badly. In Dublin Central, the Sinn Féin leader's constituency, it lost the election badly, because people do not believe in this sort of divisive politics, where only Sinn Féin represents hard-working people. Who the hell does Deputy Doherty think the rest of us represent? Who does he think Deputies Nash, Cian O'Callaghan, Ardagh, Neville and I represent? We were all elected to this place and we all represent people to the best of our abilities. The Deputy's angry man routine and dismissiveness of the bona fides of everyone else in this place is getting a bit tiresome at this stage. We are all doing our best.
We will deliver a budget this year that will have a personal income tax package. We took a series of other decisions last year. People will debate the merits and demerits of them. I am happy to debate them too. This year, there will be a personal income tax package. There will also be other ways of assisting people, through the social welfare system, the child poverty work around the working family payment and things like childcare. There are lots of steps we can take together. We have not made any decisions and I do not dismiss the idea of tax credits or USC or thresholds. I just do not accept the idea that the threshold idea is a bad one and I think the Deputy is open to considering that too.
