By Sarah Mac Donald - 11 February, 2014
Widening the bands will benefit the better off, not those earning low incomes.
Justice advocacy group, Social Justice Ireland, has called for income tax bands to remain unchanged in the next budget because widening the bands will benefit the better off, not those earning low incomes.
In a statement issued today, Fr Sean Healy, Director SJI, challenged the proposal of Minister for Finance, Michael Noonan, that the tax band ceiling of €32,800 should be raised.
“Under no circumstances should tax bands be changed in the next Budget as the benefit would only go to those who are better off, not those earning low incomes” according to Dr Seán Healy, Director of Social Justice Ireland.
The independent think tank and justice advocacy organisation said lifting the income threshold for the 20% tax band would be of no benefit to anyone with an income at or below the top of that band.
All the benefit from such a change would go to those earning above €32,800 per annum which is the current cut off point.
In his statement, Fr Healy warned that “Increasing tax credits and making them refundable would be a much fairer approach that would benefit everyone with a job, not just those earning more than €32,800, and would go some way towards addressing the working poor issue.”
“Making tax credits refundable is the fairest and best option for changing the income tax system” the Director of SJI stated.
“By making tax credits refundable, the full value goes to everybody who has an earned income. The main beneficiaries would be low-paid employees (full-time and part-time). The system would improve the net income of workers whose incomes are lowest, at a modest cost”.
According to Dr Healy, “making tax credits refundable would also be a positive policy response to the ‘working poor’ issue.”
Such a move would make Ireland’s tax system fairer, address part of the working poor problem and improve the living standards of a substantial number of people in Ireland.
“It would ensure that Ireland’s income tax system treated everybody equitably and fairly,” he said.
“Increasing the tax credit would be a less favourable way of changing the income tax systems, but preferable to widening the bands,” according to Michelle Murphy, Research and Policy Analyst at Social Justice Ireland.
“The most appropriate way to make changes to the income tax system is to make tax credits refundable before any further changes to tax credits are made.”
She explained that by making tax credits refundable any increase is distributed fairly across incomes. “If tax credits are not made refundable and tax credits are increased the benefit is not distributed as equitably”, she added.