Fulfilling the government's commitment to increase the standard rate cut off point for income tax to €50,000 would cost €2.3bn if implemented in a single year.

That's according to preliminary estimates contained in the Department of Finance's Tax Strategy Group report published this evening.

Last year the Taoiseach and Minister for Finance publicly committed to achieving the target over five years, in an effort to reduce the tax burden on middle income earners.

Currently the higher 40% rate of income tax applies on incomes above €35,300 and it has been argued that it has had a negative impact on the competitiveness of the Irish income tax regime, the report says.

The TSG states the cost estimate would need to be subject to review in each budget year to take account of updated data, including employment and income growth.  

It says if done by stages, a €3,000 increase to all standard rate bands would cost €524m in the first year, and €610m in a full year. 

The cost impacts could be dampened if individualisation of the income tax system was further advanced at the same time, the report adds.

In relation to Universal Social Charge, the document says reductions in the past five budgets have cost over €1.6bn, well in excess of the additional amounts raised when USC was introduced.

As a result, it says, further significant modifications to USC could undermine the re-structuring of the income tax system.

It also argues that continued reductions in the USC in isolation "could result in a further narrowing of the tax base."

One potential alternative change that could be made to meet the Programme for Government commitment to lower USC, which would also benefit lower and middle income households, it says, would be to continue to increase the threshold at which the second or 2% rate of USC currently applies.

The TSG also claims that reductions in the highest rate of USC could improve Ireland's comparative competitive advantage, because it makes up part of the top marginal tax rate. 

The impact of such a change would only benefit those earning above €70,044, which is estimated to be around 200,000 individuals or 6.6% of the total 3 million taxpayers, it says.

With wage growth projected to be relatively stable between now and 2023, consideration could be given to further increases to the standard rate income tax band, the report also suggests.

If this doesn't happen, increased numbers of taxpayers will end up subject to income tax at the higher rate, it warns.

This could bring an advantage in terms of the availability of tax relief at the marginal rate, it says, but in general "would increase the marginal rates of tax being paid at average income levels."

The TSG also says there are a number of options available to reach the Programme for Government commitment to increase the Earned Income Credit for self-employed people who don't have access to the €1,650 a year PAYE tax credit to the level of that credit by 2018.

The options include a €300 increase in October's budget to bring the credit up to €1,650, at a cost of €40m in the first year and €72m in a full year. 

The alternative, it says, would be a two-stage increase of €150 in each of Budget 2020 and Budget 2021, at a cost each year of €20m in the first year and €36m in a full year.