The Oireachtas Committee on Budgetary Oversight has published its Report on Indexation of the Taxation and Social Protection System in which it makes a series of recommendations and observations following detailed examination of indexation. The Committee met with stakeholders to discuss the operation and benefits of indexation, the type of payments, benefits or credits that may be suitable for indexation, the potential issues, and the impact on the national budgetary system.
The Committee noted the ad-hoc nature of the current system of taxation and welfare has the potential to further grow inequality, may result in potentially disproportionate percentage changes and does not systematically account for price or wage inflation in a consistent manner. According to the report, indexation can provide greater certainty and planning for fixed and low-income households as welfare changes and taxation levels can be known in advance.
The Committee believes that separately benchmarking each indexed parameter is necessary to develop a properly functioning indexation system in order to achieve policy goals and it welcomes the commitment in the Programme for Government that income tax credits and bands will be indexed linked from Budget 2022 onwards.
Acknowledging the complexities around the introduction of indexation, the Committee recognises the need for access to timely and accurate data from government departments and believes increased cooperation and data sharing practices would benefit the effective operation of the State, beyond the system of indexation.
Read the full report here.