Parliamentary Questions to the Minister for Finance
5th November 2012 - Alan Farrell TD
To ask the Minister for Finance if he will outline the projected implications of introducing a higher rate of tax on income earners over €100,000 on industry and competitiveness here; and if he will make a statement on the matter.
REPLY
Minister for Finance ( Mr Noonan) : As the Deputy is aware, the Programme for Government states that as part of the Government’s fiscal strategy we will maintain the current rates of income tax together with bands and credits and not increase the top marginal tax rates.
In addition, the Deputy will also be aware that competitiveness is a crucial factor in achieving sustainable growth in a small open economy, such as Ireland’s. The economy’s competitiveness is the result of a wide number of factors, with the National Competitiveness Council’s Scorecard analysing Ireland’s international competitiveness using 127 individual indicators. These range from measures such as economic growth and quality of life, to the policy inputs that will drive future competitiveness, such as the education system and the delivery of infrastructure. Taxation is one element of this policy-mix, as taxation rates impact upon the attractiveness of an economy as a place to do business and work.
It is the standard practice for the Minister for Finance to review taxation policy in the run up to the annual Budget. It is also a longstanding practice of the Minister for Finance not to comment, in advance of the Budget, on any tax matters that could be the subject of Budget decisions.
However, speaking generally, the marginal tax rate, which is described as the tax rate that applies to the last euro of the base, is an important consideration in the formulation of tax policy. Marginal tax rates are important because they influence individual decisions to work more. The OECD in its working paper ‘Tax and Economic Growth’ points to the “possibility that high top marginal rates will increase the average tax rates paid by high-skilled and high-income earners so much that they will migrate to countries with lower rates resulting in a brain drain which may lower innovative activity and productivity”.
Alan Farrell TD
Dublin FingalAlan Farrell is the Fine Gael Dáil spokesperson on Justice and is the Fine Gael Dáil Party Whip. He is…
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