Victor Boyhan (Independent)
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The next Commencement matter relates to the introduction of a 30% income tax rate. Senator Maria Byrne has four minutes to make her case.

Maria Byrne (Fine Gael)
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I thank the Minister of State for coming to the House to discuss this important issue. When this proposal was first discussed in 2022 the then Taoiseach asked that it be examined and the then Minister for Finance, Deputy Donohoe, stated that while it was not an appropriate time to introduce such a rate as it would be very difficult to do so, the matter should be examined down the line. Last year, the Minister for Finance, Deputy Michael McGrath, indicated he would consider the matter early this year. Will the Minister of State indicate whether negotiations and a process have commenced? It would help middle-income earners if we introduced a 30% tax rate for incomes of up to €50,000. The squeezed middle have gone through a very difficult period recently, especially as a result of Covid and the cost-of-living crisis. Many young families fall into the middle-income category. Is there an update on this matter?

Mary Butler (Waterford, Fianna Fail)
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I thank the Senator for raising this Commencement matter, which I am taking on behalf of the Minister for Finance.

As the Senator will be aware, the programme for Government, Our Shared Future, contains a number of specific commitments relating to income tax, specifically 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.

Significant progress has been made in achieving this commitment. For example, over the course of last two budgets the Government has increased the standard rate cut-off point for single persons by 13.3%, from €35,300 to €40,000, with commensurate increases for persons who are married or in civil partnerships. In addition, the main tax credits - personal tax credits, the employee tax credit and the earned income credit - were increased by €125 each or 7.6%, from €1,650 to €1,775. It is also worth pointing out that the earned income tax credit was equalised with the employee tax credit in 2021. The home carer tax credit was also increased by €100, from €1,600 to €1,700, in budget 2023.

To respond to the Senator's question on examining a 30% tax rate or an intermediate rate of income tax, the position is that the 2022 report of the tax strategy group, TSG, examined the issue last summer, setting out a broad range of policy and operational considerations, as well as the cost of such a measure and the potential number of beneficiaries. The resultant report can be located on the Department of Finance’s website.

As outlined by the Minister for Finance in budget 2023, it was decided that further analysis of the TSG report would be appropriate, as the Senator noted. In addition, and also signalled in budget 2023, the Government is committed to a review of the personal tax system having regard to the medium term. In this regard, on 8 March, the Minister for Finance launched a public consultation in respect of the review of the personal tax system. The terms of reference for the review were also published.

In broad terms, the review will encompass the following strong focus on the programme for Government's commitments relating to income tax and USC.There will be further analysis of the introduction of an intermediate or third rate of income tax, building on the work of the TSG last year, and further analysis of the recommendations of the Commission on Taxation and Welfare directly relevant to income tax and USC. The review will also encompass an international comparative analysis of Ireland's personal tax system against those of other jurisdictions.

Work on the personal tax review by officials in the Department is under way. As the Senator will appreciate, this work is ongoing. It would be premature for me to elaborate on the specificities involved. However, I assure the Senator that the personal tax review will further examine the option of introducing an intermediate or third rate of income tax, together with the other matters I have just outlined.

Maria Byrne (Fine Gael)
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I thank the Minister of State. I also thank the Minister for Finance, Deputy Michael McGrath, and the team in the Department. It is important that they look at this carefully. Obviously, on the basis of the progress made and the different steps that have been taken, it is clear that a thorough review is taking place. I thank the people who made submissions to the consultation process. The Government needs to look at something for those who are in the middle in order that they can earn up to €50,000 or that a 30% tax rate is introduced. That would be very beneficial, especially for many young families who are just outside that tax bracket. They end up on the higher rate by a small margin. This is important because it would make a huge difference to the take-home pay people have in their pockets if it were introduced. I thank the Minister and the team, and look forward to the result.

Mary Butler (Waterford, Fianna Fail)
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I again thank the Senator Byrne raising this issue. The Government is committed to supporting and encouraging workers and to reducing their income tax burden. As I outlined, significant progress has been made in recent budgets to deliver on the programme for Government income tax commitments. The summer economic statement, which will be published in coming weeks, will set out a budgetary framework within which budget 2024 can be delivered. It will also set out the overall parameters for the total tax package for budget 2024. As I have mentioned, officials from the Department of Finance are progressing the review of the personal tax system It will encompass a broad range of personal tax matters, including a further examination of the option of introducing an intermediate or third rate of income tax. The Minister for Finance will then consider the results of this review in due course.

Victor Boyhan (Independent)
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I again thank the Minister of State for coming to the House and responding to the various matters in a comprehensive fashion. It is appreciated. The final matter is in the name of Senator Garvey. As she is not present, I propose that the proceedings of the House stand suspended until 10.30 a.m.