41. Deputy Catherine Callaghan asked the Tánaiste and Minister for Finance if he will introduce a ‘work more, keep more’ model to reduce tax on overtime as part of Budget 2027, in the spirit of making work pay; and if he will make a statement on the matter. [48307/26]

It is a general principle of taxation that, as far as possible, income from all sources should be subject to taxation.

Ireland has a progressive income tax system which is structured such that the more income you earn, the more tax you pay. As a person’s income increases, they move up through the various rates and bands and, as a result, while the levels of take-home pay increase overall, the amount of tax they pay also increases. The introduction of a rate of taxation on overtime that differs to the rate of taxation on other income could lead to unintended consequences such as negative behavioural changes and also tax avoidance issues.

The ‘Programme for Government 2025: Securing Ireland’s Future’, contains specific undertakings with regard to personal taxation, it commits to “implementing progressive changes in taxation if the economy remains strong, including indexing credits and bands to prevent an increase in the real burden of Income Tax while in the event of an economic downturn and unexpected deterioration in the public finances we would postpone changes to Income Tax credits or bands, as we did in Budget 2021”.

As the Deputy will be aware, to ease the burden facing average and middle-income earners, over successive Budgets the previous Government substantially increased the entry point to the higher rate of income tax for all earners by €8,700 or c. 25 per cent. The main tax credits have also been increased by €350, or c. 21 per cent. In line with the Government policy of ensuring full-time workers on the minimum wage remain outside the charge to the top rates of USC the ceiling of the 2 per cent USC rate band was increased by €6,898, or 34 per cent, from 2020 to 2025. Budgets 2024 and 2025 also cumulatively reduced the 4.5 per cent rate of USC to 3 per cent.

Finally, as the Deputy will appreciate, decisions regarding taxation measures are made in the context of the annual Budget and Finance Bill processes, at the appropriate time, and having regard to the sound management of the public finances.