Dáil Éireann debate -
Wednesday, 28 Jan 1976

Vol. 287 No. 4

Financial Resolutions. - Financial Resolution No. 9: Income Tax

The Taoiseach

I move:

(1) That, with effect as on and from the 6th day of April, 1976, Chapter IV of Part V of the Income Tax Act, 1967 (No. 6 of 1967), be applied to all emoluments assessable to income tax under Schedule E other than the emoluments specified in paragraphs (b) and (c) of section 125 of the said Act.

(2) It is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).

Mr. Colley

Would the Taoiseach indicate the purpose of this resolution?

The Taoiseach

The purpose is to provide for the extension of PAYE to all employees at present assessed departmentally. The House will recall that when PAYE was introduced by the Finance No. 2 Act, 1959, with effect from October, 1960, all employees for whom a statutory scheme of taxation deduction was already in operation were excluded from the PAYE scheme. These are now being brought into the scheme as and from 6th April next.

Mr. Colley

There are two questions I would like to ask on this. First, is it proposed to apply the PAYE system to public service pensioners as well as those who are on salaries?

The Taoiseach

Yes.

Mr. Colley

Does the Taoiseach realise that by doing this there can be a very substantial imposition on such pensioners, particularly in the first year, unless—and this brings me to the second question—an undertaking given by the Minister for Finance, in response to a question from Deputy Haughey on a financial resolution in June and repeated by him in the House afterwards, is honoured? That undertaking by the Minister was that nobody would be asked to pay in the one income tax year tax on more than one year. If that undertaking is being honoured the problem will not be as serious as it would otherwise be, but if it is being honoured, perhaps the Taoiseach will explain the mechanics of that, how it is proposed to do it?

The Taoiseach

The assessment is only for one year but the actual arrangement for this would be spread over a three-year period.

Mr. Haughey

Would the Taoiseach and the Government not consider exempting pensioners from this arrangement altogether? Pensioners are in a completely different situation from people who are still in the public service. Whatever possibility a public servant who is still in the public service has of meeting this new and unfair imposition, the unfortunate pensioners have no way of coping with it. It would simply fall harshly and cruelly on the very hardpressed and unfortunate section of the community. I would seriously ask the Taoiseach to exempt public service pensioners completely from this arrangement. I do not think there is all that much in it from the point of view of the Exchequer. These people are coming to the end of their taxpaying life anyway and the State will catch up with them when they die, in any event. Therefore I think there is a very strong case to be made for exempting pensioners entirely from this new arrangement and letting them continue under the existing system.

The Taoiseach

The State will not catch up with them now because death duties have been abolished. The Deputy is thinking of the time before the advent of this Government when death duties were still in operation. This tax is applicable for one year and the Minister has arranged a remission which I think is reasonable. There are a total of 130,000 in all who would be charged for the year 1976/77 on their actual earnings instead of, as previously, on the year 1975/76.

Mr. Colley

Would the Taoiseach elaborate a little more on the arrangements he has in mind and in particular on the reference he made to the spreading of this over three years? I do not quite follow that.

The Taoiseach

The remission is being spread over three years——

Mr. Haughey

The increase, the imposition?

The Taoiseach

——and this would cost about £6 million this year, leaving an estimated net gain to the Exchequer of about £5 million.

Mr. Colley

Will an individual taxpayer affected by this get any remission of income tax at any stage——

The Taoiseach

Yes.

Mr. Colley

——in order to meet the additional imposition?

The Taoiseach

It corresponds to the remission that was given in 1960 when it was originally introduced.

Mr. Haughey

Would the Taoiseach confirm that for the first time ever the upshot of the whole thing is that public service pensioners are going to be worse off as a result of this budget than they were before the budget? Is that not the position?

The Taoiseach

No. Public service pensioners are also getting the increase in their pension.

Mr. Haughey

But this will more than cancel that out and leave them worse off.

The Taoiseach

They will also get income tax relief, if they are entitled to it.

Mr. Haughey

Where is the great humanitarian Government? Screwing the unfortunate public service pensioner.

Mr. Colley

I would like to return to the plea made by Deputy Haughey. This would apply only to existing public service pensioners. Those who retire in future on the PAYE system will not be affected in this way. It is those who are on the other system and who are suddenly brought under the PAYE system who are going to have to pay a very heavy imposition. I think it would be worth while to examine this. There cannot be all that much involved for the Exchequer. I would ask the Taoiseach if he would undertake at least to have the matter sympathetically examined between now and the introduction of the Finance Bill.

The Taoiseach

I do not think we could justify treating one set of pensioners differently from another.

Mr. Colley

They are being treated differently. These are the people who are on pension. Those who will go on pension later will already be on the PAYE system——

The Taoiseach

Other pensioners who are not in the public service are obliged to pay.

Mr. Colley

People who are on pension and not in the public service are treated differently in many other ways from public service pensioners, so I do not think that argument will hold. Would the Taoiseach have it examined between now and the introduction of the Finance Bill?

The Taoiseach

Certainly.

Question put and declared carried.