I move:
That Dáil Éireann calls on the Government to make provision in the forthcoming Budget for a substantial increase in personal and dependents income tax allowances as they bear no relation to the purposes for which they were originally intended.
The Labour Party have always believed that there should be greater emphasis on direct taxation as against indirect taxation than there is now and than there has been in recent years. We favour a tax on incomes, a tax on wealth, but it appears to us that income tax as designed at present falls most heavily on those who cannot well afford to bear it and that it should fall most heavily on those who can best bear it. Under our income tax code at present, those in the lower income group pay an undue amount of tax as wage and salary earners. Here, it should be emphasised that for such persons, those earning fixed incomes, there is no escape by way of allowances. It is true they have some allowances, apart from the personal, dependents' and children's allowances but such allowances are very limited. It should also be emphasised that since PAYE was introduced the wage or salary-earner pays in accordance with the income tax code and regulations to the very last penny, or I should say, halfpenny.
Some persons have recently pointed to the fact that workers pay income tax as an argument or demonstration of how well off they are. A relatively small number of people paid income tax 25 or 30 years ago. This number has risen substantially. It is often protested that £13 a week is a pretty comfortable wage or salary. It is a fairly average wage or salary over the whole country. I read recently that over 100,000 in this country have less than £13 per week.
The purpose of this motion is to demonstrate that the allowances provided under our income tax code are inadequate when one has regard to various factors. I want to take first the example of a single man who has £13 per week. As I said, there are many tens of thousands who are in receipt of that particular amount, which comes to £676 per annum. A single man gets an earned income allowance of one quarter of that, which is £169. That, deducted from his £676, leaves £507. He gets £234 personal allowance, leaving him £273 on which to pay tax. The manual worker has certain allowances and so has the clerical worker, but in my experience, the allowances for insurance, for payment of social welfare contribution and for, say, dungarees and laundering of dungarees and so on, amounts to about £20 per year. The net point so far as he is concerned is that he has to pay £90 per year in income tax.
I do not think it was ever visualised that a man with £13 per week, even a single man, would be required to pay what I regard as the exorbitant sum of £90 per year. This is somewhat less than £2 per week. When one has regard to that fact and to the fact that he pays social welfare contributions and weekly contributions to his trade union, one realises that his £13 per week is very much diminished indeed. The married man with £13 per week, or £676 per year, receiving the earned income allowance of £169 and the married allowance of £394, discovers that after getting an allowance of, say, £20 for various sundries, he is taxed on £93 per year. This means that the married man with £13 per week, apart from having to pay his social welfare contributions and his contribution to his trade union, pays about 10/- or 12/- per week income tax.
I do not think that is fair or reasonable and certainly it is not just. It is one of the reasons why we say that allowances in respect of such people should be increased so that their wages or salaries will be of real benefit to them. I think I am right in saying that there is an allowance for payments of fees for membership of chambers of commerce but there is not, or there was not in recent years, any allowance for the payment of trade union dues or contributions to a man's union.
In the case of the married man with two children, it is also reasonable to say that he pays an undue proportion of tax. With £1,000 per year, and giving him the various allowances, he pays something like 12/- per week income tax, apart again from the fact that he is not allowed his household responsibilities such as rent and rates, electricity supply charges and all that sort of thing. As a manual worker, he also has to pay social welfare and trade union contributions. There is, of course, also the other indirect taxation which has been imposed on him particularly in recent years in the from of the turnover tax and as well on the usual commodities which are and have been subject to taxation for quite a long time, cigarettes, drink and different other items. However, do not misunderstand me or any other member of the Labour Party in regard to this tax because we demonstrated our attitude to that type of tax last year. When we were satisfied that the extra moneys being raised were being devoted to worthy causes in the matter of social welfare, we supported the Government.
It seems to me, therefore, when one has regard to the amount of taxation that has to be paid by those of relatively modest means, that their efforts in recent times to improve their living standards and improve their lot have been somewhat negatived by the payment of income tax, on the basis of the small allowances that now obtain. In respect of these allowances, we should accept the principle that they should be fair and above all, that they should be realistic and should be established on a far better basis, particularly for those with family responsibilities. It is true that some years ago these allowances did bear some relationship to the cost of maintenance and the cost of living, but they have not been increased side by side with the fall in the value of money, or indeed with the increase in the cost of living.
The commission established some years ago to inquire into income taxation did a tremendous amount of work and produced a valuable report for the Minister and Dáil Éireann which contains recommendations which in the main have not been favourably received by the various Ministers for Finance since they were published in 1962. There again I think the motion is certainly compatible with the recommendation on page 14 of the Report of the Commission on Income Taxation, in paragraph 27, which is as follows:
We recommend recognition of the principle that income tax should not be payable on the income needed for minimum subsistance; and that the effective exemption limits should be based on the personal allowances, including earned income allowance, without the complication of a formal exemption limit.
I do not think that anybody could argue that the allowances now made in respect of income tax could be regarded as "minimum subsistence" even as mentioned in this recommendation, because, in my opinion, the present allowances are less than minimal. As it stands, the personal allowance for a single person is £234 per year; in 1939, if my memory serves me correctly, it was something like £120. I may not be absolutely accurate in that but certainly money has fallen at a far greater rate than this allowance has increased and the cost of living since 1939 certainly has gone up in a far bigger proportion than £120 to £234. The allowance for a man and wife is £394 and this certainly could not be argued as being at subsistence level.
There is one anomaly that must have occurred to the Minister and many other Members of the House in respect of the allowance for a single person and that for the married couple. For a single person, it is £234, and for the man and his wife, it is £394. The actual fact here is that the Revenue Commissioners or the Government believe that £160 is sufficient on which to maintain a wife. There is another point which again I am sure must have occurred to various Ministers for Finance and to the present Minister, that is, the comparison between the allowance to a man and wife of £394 and that, say, to two brothers living in the one house where the allowance is £468 per year, or £234 each. The least the Minister for Finance could do as far as this allowance is concerned is to put the man and wife on a par with two single people who live under the one roof. After all, there is the one amount paid for rent and rates and for general household expenses. To differentiate in such a big way between the married couple and two single people—they could be two brothers or a brother and sister—is something which the House and the Minister must agree is grossly unfair.
There is another excellent recommendation made by the Commission on page 16, in paragraph 36:
We recommend that the personal allowance for married persons should be at least twice that for unmarried persons.
This again is in accordance with the motion in our names and some effort should be made to put it into operation.
On page 17, there is a recommendation in regard to a widowed person. This is in paragraph 39:
We recommend that a widowed person should be entitled to the equivalent of the married allowance for the four years following that in which widowhood commences; and that after this time he or she should be entitled to the unmarried allowance only.
On page 17, there are arguments in favour of this, as there are arguments, and convincing arguments, in my opinion, in regard to the other recommendations. As far as the widowed person is concerned, I believe, in accordance with this Report, that there should be far more leniency in regard to this allowance for widowed persons.