The Conference of Religious of Ireland's justice commission has said that most proposed income tax changes would "widen the gap between rich and poor".
In a briefing document on taxation to be published today, it said reducing tax rates would "substantially widen the enormous gap that already exists and worsen an already unacceptable situation". The document analyses seven instruments the Government has available to change the income tax system, including increasing credits, widening bands, reducing rates or changing the levy or PRSI payment levels.
"The most progressive of these by far would be the increasing of tax credits [standard rated tax allowances]," said Father Sean Healy. "By increasing tax credits the Government would be returning the same amount of money to all income tax earners in the top two-thirds of households in income terms. However, tax credits would have to be made refundable if low-paid employees were to benefit equally with the better off on Budget day." With tax credits refundable, "those whose tax bills are less than the credit receive a payment equal to the difference. Therefore the main beneficiaries of refundable tax credits would be low-paid employees, full time and part time," he said.
While ensuring tax changes did not widen the gap between rich and poor, increasing tax credits also "had the major advantage of addressing the disincentives currently associated with low-paid employment". The CORI document also calls for the family income supplement to be part of the tax system. It wants individualisation to proceed "in a fair and equitable manner". There should be moves towards introducing a basic income system and a change in the income tax system should benefit those on low and middle incomes as much as the better off.
Corporate tax rates should be increased in the medium term, while changes in indirect taxation should discriminate in favour of those on lower incomes. The burden of taxation should be shifted to "eco-taxes" on water, fuel, fertilisers and waste disposal.
