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Dublin: 14 °C Monday 28 July, 2014

Social Justice Ireland says Government’s new tax proposals should be rejected

The think tank said the proposals should be rejected as they will only benefit higher earners.

NEW TAX PROPOSALS made over the weekend by Government should be rejected as they will only benefit higher earners, said Social Justice Ireland (SJI).

They said that those earning above €125,000 will receive €922 a year, while give nothing to those earning less that €32,000.

A study by Social Justice Ireland, entitled, ‘Fairness in changing income tax – an examination of three options’ compares both Government proposals – which is increasing the 20 per cent tax band and reducing the 41 per cent tax rate – and a third option, which is increasing tax credits.

Tax credits

The research found that the fairest outcome is achieved by increasing tax credits and would provide the same value to all taxpayers across the income distribution provided they were paying more than €108 in income taxes.

Social Justice Ireland said the most unfair option would be to decrease the 41 per cent tax rate.

“This would benefit only those paying tax at that rate. Therefore, the single earner on €25,000 gains nothing from this change while those on €50,000 gain €172 per annum and those on €125,000 gain €922 a year. The higher the income, the greater the gain,” said SJI.

SJI said that changes to tax credits rather than tax bands and tax rates was the “most desirable” in the context of achieving fairness.

The poorest

Michelle Murphy, Research and Policy Analyst with SJI said the “poorest 10 per cent of society lost most since the onset of the crisis. A widening of tax bands as proposed by the Minister for Finance would not improve their situation but would increase inequality and widen the rich/poor gap”.

SJI state that increasing the standard rate band also provides gains which are skewed towards those with higher incomes.  ”Again, the person on €25,000 would gain nothing but a person on €50,000 would gain €283.50 a year,” they said.

In order to compare these options the study allocated the same amount – €205 million – to each option. SJI said that although all the income tax options cost the same, they each have very different impacts on the income distribution.

“Under no circumstances should the 20 per cent income tax band be widened or the top tax rate reduced in the next Budget,” said Murphy.

SJI clarified that their priority for Budget 2015 is not reducing taxes, but said that the best option in their opinion is to allow tax credits be refundable, stating that the main beneficiaries would be the low-paid employees.

To read their report click here>

Read: Bank admits tax ‘misconduct’, but blames employees>

Read: Tax-cut talk is “a return to auction politics”, Dáil is told>

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