asked the Minister for Finance the percentage of earnings now paid by the average wage earner (a) in direct taxation and (b) in indirect taxation as compared with five years ago.
Ceisteanna—Questions. Oral Answers. - Taxation on Earnings.
14.
Information of the type sought by the Deputy is collected by the Central Statistics Office through the household budget surveys. The latest information from this source relates, however, to 1980 and no up-to-date comparison is available. As an indication of the overall change in the tax burden in the past five years, total tax revenue, as defined for budgetary purposes, has grown from 26.7 per cent of GNP in 1979 to an estimated 36.5 per cent of GNP in 1984. Of this total, direct tax revenue increased from 11.5 per cent to 16 per cent and indirect tax revenue from 15.2 per cent to 20.5 per cent.
Those figures show an alarming increase over the period given in both direct and indirect taxation. How does the Minister see the trend from this on out?
I agree that the figures show a substantial increase in the tax burden over the period which I have indicated. It was precisely the Government's concern with that trend that led us to include in the national plan as one of the central policy points the stabilisation of the tax burden at 36.5 per cent of GNP.
Will the Minister acknowledge that since he came into office the total income tax payable has increased from £1,459 million to a projected £2,131 million and that the total tax has increased in the same time from £4,000 million to a projected £6,400 million? Would he not acknowledge that that increase is not consistent with what has been set out as an essential element of Government policy, the tackling of high level taxation? Is it not the reality that in absolute terms since the Govern-ment came into office the figures as a percentage of the increase have been growing at a rate of noughts, so to speak?
I find very little to agree with in what the Deputy has said.
What about the figures?
The figures are beyond dispute. The increase in the tax burden in the period to which the Deputy refers reflects a number of factors, including the fact that the party opposite embarked on a spending spree in 1977 and did not seem to care very much about what happened in the area of total expenditure. The figures for the change in tax revenue in the past couple of years — the officially published figures which the Deputy is using and which are beyond dispute — show that the total tax burden as a percentage of GNP is increasing. They show also, among other matters, that as nominal incomes increase the total tax take increases. The Deputy seems to have some difficulty in distinguishing between the effect of rates of tax and the effect of the expansion of the base for tax. For example, if a tax remains at a given rate and the people spend more money, the total take will increase. All of that is a matter of objective record. Total tax burden has been increasing during a period and this Government did not consider it proper or desirable, either socially or economically, to allow the tax burden continue increasing. That is why we provided specifically in the plan for the maintenance of the burden at its current level of 36½ per cent of GNP.
I am obliged to the Minister for the lecture but perhaps he would return to the figures. He will acknowledge that, since he came into office, income tax has more than doubled as a result of the increased levels of tax he has imposed. The higher rate was increased to 65 per cent although the Minister has now had a change of mind on that. He may go back as far as he wishes but we are talking about the years during which he has been in office. Will the Minister acknowledge that if in respect of income tax alone he is seeking an additional £165 million over the outturn for last year, an increase of more than 8 per cent, he cannot justifiably tell the public or anyone else in the course of his lecture that is reducing the burden of income tax at a time when the rate of inflation is forecast at 6 per cent. Effectively is that 8 per cent increase not a real increase of 2 per cent on the basis of the inflation figure? The facts are rather coercive.
There is no disputing the facts, but the Deputy again is confusing tax take with tax rates. It is a matter beyond contention that this year, for example, had we not made the changes provided for in the budget, income tax revenue for this year would amount to £58,500 million more than what will be the figure.
The Minister is living in an Alice-in-Wonderland world.
There is no doubt that if the total income tax base is increasing, if the total amount of nominal taxable income is increasing, the total amount of tax collected will increase. Therefore, it is not valid for the Deputy to argue that the figures this year will represent an increased tax burden. What he is observing is the increase in tax take from the operation of the modified system to the total income tax base.
I agree with Deputy O'Kennedy's line of questioning and I should like the Minister to say whether the total tax burden he talks of includes or excludes charges in respect of water and refuse collection which are a burden of taxation on the average household.
The 36½ per cent as defined here does not include those charges.
Therefore, the Minister's argument falls flat on its face.
Do the figures the Minister has given this year for income tax exclude also what was not included in 1982: the income levy and the youth employment levy, which amount to £162 million? When those are added to the burden of income tax the reality I have been pointing out is underlined.
As I have said, the total tax burden, including the levies to which the Deputy has referred and provided for in the budgetary figures this year, is 36½ per cent of GNP. Our intention in conforming with the provisions of the national plan is to keep the total tax burden at that level for the duration of the plan, that is, to avoid a further increase in the tax burden.
If we take value-added tax, we find that the increase in this respect has been from £946 million in 1982 to the present projection of £1,483 million. Would the Minister conceive that that is also a very considerable increase in real terms, either as a proportion of GNP or in any other terms?
The Deputy is showing a most unaccustomed dexterity in regard to the manipulation of the figures. Those are the figures for the total VAT take, a take that was increased very substantially by the strategy resorted to by Deputy MacSharry as Minister — imposing VAT at the point of entry. Many of the Deputies opposite have been complaining about that provision ever since, but I can understand their point of view. The total tax take for 1982 and for every successive year has benefited from the raising of the level of take as a result of the imposition of VAT at point of entry.
The Minister is the hero of the Revenue Commissioners.
That is a measure to which the gentlemen opposite resorted but which has been a matter for bitter regret for them ever since and they are not prepared to claim credit for it.
What about the huge amount of additional revenue?
The figures for the tax take are beyond dispute. They are as accurate as is possible. They reflect the fact that over the period in question there have been increases in rates of VAT and there have been substantial increases also in the taxable base in respect of VAT. As people spend more money and as the total amount of activity in the economy expands, a given rate of VAT will obviously produce more revenue. Even during the course of this year, as we reduce rates of VAT — and we have reduced the rates substantially across the board — we will have an extra take from VAT as a result of the increased level of activity.
What about the 235,000 who are out of work?
All of that is within the overall 36½ per cent of GNP, which is the figure we intend maintaining between now and the end of 1987.
I will not make a speech, I will leave that to the Minister. One final point.
We must get back to the Family Planning Bill.
I will leave the Minister's speech on the record, but I would prefer to rely on the facts. The Minister can make as many speeches as he likes——
That is not a question.
The facts are killing. This Minister has raised the level of income tax——
The Deputy is not even attempting to ask a question. The remaining questions will appear on next Tuesday's Order Paper.