Amendment No. 10 has been ruled out of order. Amendment No. 11 is in the name of Deputy O'Kennedy and amendments Nos. 12, 13, 14, 15 and 16 are related. Amendments Nos. 11 to 16 together, by agreement.
Finance Bill, 1986: Committee Stage (Resumed).
Section 1 agreed to.
SECTION 2.
Amendment No. 10 not moved.
I move amendment No. 11:
In page 10, in the Table, Part I, column (1) to delete "£4,700" and substitute "£5,000".
This is the only substantive amendment we are putting to the House for consideration on the income tax allowances and tax bands. It is very much less than would be expected from any Opposition, and very much less than the Minister proposed when he was in this seat four years ago. In one of his amendments when he was Opposition spokesman for Finance he called for an extra expenditure of £162 million in 1982 and the Official Report of the debate on the Finance Bill, 1982, records that fact.
In this amendment, which affects all the income tax bands, we are proposing to increase the 35 per cent tax band from £4,700 to £5,000. The other bands will remain the same, but the tax liability of all taxpayers, particularly those on the lower tax bands, will be reduced by a reasonably significant figure. I do not yet have the precise cost of this amendment, although I have an approximate figure, and it might be helpful if the Minister told me what this measure would cost in 1986 and in a full year, if adopted.
In 1986 the figure would be £14.9 million and in a full year it would be £24.9 million.
I thought it would cost approximately £15 million this year and the Minister has confirmed that. The Minister's figure of £14.9 million is the gross amount and the actual loss to the Revenue in net terms would be of the order of £10 million. I want to have it recorded that that is what it would cost to implement our proposal. I do not want anybody on the Government's side saying during the debate that Fianna Fáil argue for spending money freely and without any sense of concern. Before this debate ends I will be able to demonstrate that, if all measures we are proposing were adopted, the extra cost in taxation would not exceed £25 million, in many cases the Minister would get enhanced tax revenue and there would be a major boost to the economy.
We put down this amendment because it is important that all taxpayers should benefit from our proposal. Clearly we would like to achieve a position where two-thirds of taxpayers would be paying the standard rate. That does not go quite so far but it moves in that direction. In achieving that we would fall in line with the pattern of the other member states of the EC. It must be recalled that, since this Government came into office, total taxation has increased two and a half times and income tax has more than doubled in the same period, and all that from a Government who, amongst other promises which they have blatantly ignored, promised to reduce or maintain the level of taxation. Taxation is the base of the problems we have been experiencing for the past three years in particular. Some economic commentators have writ- ten the present Minister's name up in lights. I refer him especially to editorials in the Wall Street Journal. Many of these commentators will prove conclusively that the policies pursued by this Government on tax imposition——
Does the Deputy agree with the Wall Street Journal?
I agree with their comments on the Minister in this area and they took the opportunity to make comments in two successive editorials.
Their economics are particularly——
It was not particularly flattering to the Minister.
I would pay much more attention to what Deputy O'Kennedy says than to what the Wall Street Journal say.
They flattered him at least by mentioning him. I must admit they never mentioned me so it could be a question of a certain sense of envy.
I will have to read that paper. It qualifies for the civic school of economics.
The Deputy without interruption.
The Minister is proclaiming that the Wall Street Journal should be acknowledged publicly as the city school of journalism. That is one way of dismissing those who criticise him. Not many others would have the same view.
I said I would pay more attention to what Deputy O'Kennedy is saying than I would to editorials in the Wall Street Journal on this topic, given the basis on which they are founded.
With the growth of income tax here to two and a half times what it was when this Government came into office, and with the obvious example of the impact of taxation on our economy, it is time the Government made this minimal — as the Minister has acknowledged it is — adjustment towards equity and taxation and particularly towards reducing the impact on the higher tax bands. A 35 per cent rate of tax is by no means a light tax burden in any other country. In some EC States it is about the maximum that applies and, as the Commission on Taxation have pointed out, we should be moving in that direction. This proposal is meant to achieve at least the first faltering steps to attain that degree of balance in our tax code and that degree of equity. It will be particularly beneficial to the lower paid but it will affect every other taxpayer through the other tax bands. That is the way it should be. The lower paid in particular should be encouraged. The reasons are obvious.
First, the work incentive has been absent from our country for the past three years. The fact that people move into higher tax bands through overtime has caused major problems for productivity for many of our industries. Very many businessmen must have told the Minister, as they have told me day after day — and he must have been in direct contact with many of these industries in his former responsibility — that when they get special orders to be fulfilled within a limited period they cannot arrange overtime with the workforce to meet those special orders because they move into higher tax bands. As a consequence many market opportunities are being lost to this economy. That is one of the matters I am attempting to tackle in this amendment.
Second, this affects our general level of taxation. It is now established beyond yea or nay that our general level of taxation is the highest in all the democratic countries in the world and it is past time that we did something about it. It has been the biggest single disincentive to investment in this economy, when outside the opportunities for expansion are unprecedented, when markets are opening and other economies show growth projections of a kind they have not experienced for the past 15 years and when the Federal Republic, Japan and all the leading economies of the western world are revising upwards their growth targets for 1986. All these new markets are available to us provided we turn our backs on the policies of retrenchment that have been characteristic of this Government.
We are not proposing here a spendthrift policy, far from it. As will be evident from every amendment we introduce, we are proposing a modulated, prudent approach which is the signal for a total reversal of the policies that have been pursued for the past three years. This Minister has had the unique opportunity while in Government of being given a new responsibility within the same Government. In some instances I would be quite happy to acknowledge that in many of the things the Minister has been saying and some of the things he proposes in this Bill, he has shown a new sense of direction, which we welcome, to promote investment and to encourage incentive, but he will acknowledge that it does not go nearly far enough either to overcome the problems or to meet the potential that is there at this moment. We must give a clear signal that at last we are beginning to tackle the burden of taxation which is the single major brake on our economic development now and has been for some time past.
I do not want to extend the argument here. The facts speak for themselves. Our amendment has been very carefully framed after much thought and consideration. It has the merit that, while it will impinge particularly on the lower paid, it will have an effect on the other bands. Fortunately, it does not reduce the total tax revenue even in tax terms by any significant amount, £10 million out of a total tax take of £6,000 million. I will be able to demonstrate in a more general debate that not only would we not lose revenue if this proposal were adopted, but because of enhanced economic activity, increased employment and lower social welfare payments, we would have a very much better return than the immediate cost of £10 million to the Revenue would suggest. I press the Minister to accede to this proposal, major in terms of impact but not in terms of cost.
On a point of order, Sir, I want to ask you how Deputy O'Kennedy's two amendments and Deputy O'Malley's amendments are in order when they involve a charge upon the people and my amendment No. 10 was ruled out of order on the basis that it involves a charge upon the people. The Minister for Finance said Deputy O'Kennedy's amendments would cost £14 million or something of that nature——
No, it is the other way around.
——and the amendments I put forward will not involve a major cost.
He knows that mine will not involve cost.
I know the procedure in regard to amendments.
Deputy Mac Giolla, the Chair has ruled that your amendment No. 10 is out of order because it would involve extra cost and the others do not create additional cost on the people.
Can I explain?
It is already explained that it was ruled out of order.
Can the Minister explain?
It was not the Minister who ruled him out of order. It was the Ceann Comhairle. It was the Chair, which is a constant thing. Whoever is in the Chair is the Chair.
You are constantly reminding me of that.
The Cheann Comhairle is not here but the Chair is still here.
The Ceann Comhairle ruled your amendment out of order and the Chair must stand by the decision irrespective of who is in the Chair.
I accepted the ruling of the Ceann Comhairle but can the Chair explain how the amendments of Deputy O'Kennedy and Deputy O'Malley are in order?
The Chair found that there was no question of any charge on the people in respect of the amendments submitted by Deputy O'Malley and Deputy O'Kennedy.
It seems like a very big charge to me.
The problem is, as the Leas-Cheann Comhairle said, that Deputy Mac Giolla's amendment would increase taxation on some people from 58 per cent to 70 per cent. Increasing the burden in respect of some people is a charge on some of the people and that is why it was ruled out of order.
That is a reserved function of the Minister for Finance.
Under Standing Orders, not by any wish of mine. I would be delighted to hear suggestions from the opposite side of the House as to how taxes could be raised. I have a great deal of sympathy with Deputy O'Kennedy's point. Of course the burden of taxation is too high and we would like to get it down. Many people do not have an incentive to take on additional work and if they feel discouraged it has a bad effect on them. I have no doubt that that is the case because we have a higher burden of taxation than most of our competitor nations. We also have a higher debt than any other country and virtually every pound raised in income tax is used to pay interest on that debt, either to domestic bond holders or to foreign banks. We have to run the country on VAT and excise duties and whatever other small taxes are collected. Income tax revenue is not available to us because it is used to pay interest to banks. That does not apply to other countries with which Deputy O'Kennedy unfavourably compared this country. I wish it were otherwise and I am sure he does too, but no amount of "blaming the Government" changes that.
Obviously we must try to reduce the burden of taxation and we are doing so in the budget. Deputy O'Kennedy has adopted a form of tunnel vision, he is looking at his proposal and saying how reasonable it is. There is no doubt that within its own lights it is reasonable and it would be great if we could adopt it. However, he has ignored the other steps taken by the Government to relieve the burden of taxation such as the reduction in the top rate of tax, the abolition of the 1 per cent levy, the increase in the PAYE allowance and so on which are all designed to improve the situation. This year we are spending in the region of £120 million on tax reliefs whereas if we were simply indexing, as was done last year, we would be spending £65 million or £70 million. We are relieving taxation in excess of indexation by a substantial amount. Deputy O'Kennedy wants to do more and so do I but the problem is that, to do more, you must reduce expenditure. Deputy O'Kennedy's proposals would cost money in terms of the immediate loss even after taking into account——
They will raise money.
——the buoyancy effects. Deputy O'Kennedy's argument in relation to buoyancy must be qualified by the fact that much of the buoyancy created by consumer spending is to the benefit of the British, German or other economies because we have a higher propensity to import than most comparable economies.
This debate has not added much to the store of public wisdom because we all agree that taxation should be reduced, it is simply a question of what we can do in a given year. Deputy O'Kennedy says he wants to reduce taxation, I say "amen" to that, but we cannot do any more this year. However, we will try to do better next year.
The Minister will not be in office next year.
The public knows very well that everybody in the House — with the possible exception of The Workers' Party — wants to reduce taxation but our problem is to reduce expenditure. That is when the going gets difficult and we all know that it is very easy to increase expenditure——
Scrap a few agencies and the National Development Corporation.
I am glad that Deputy O'Kennedy mentioned that because I was listening to his revered leader whose solution to practically every problem is to set up a new agency. He wants a new marine Department, a new food agency and a new heritage body——
The Minister has got it wrong.
Deputy Haughey's answer to every problem is to set up a new bureaucracy which conceals the lack of original thinking on the other side of the House. Agencies cost money to run, which means more taxation. Deputy O'Kennedy made great play of the fact that the amendments would cost only £24 million in a full year but that does not take account of the fact——
That is the gross cost.
——that on the expenditure side where we already have the largest debt in the developed world, Deputy O'Kennedy's party want to spend an additional £200 million on the building industry, all of which will be borrowed from foreign banks if he does not want to shove up domestic interest rates by borrowing it at home. He had a number of other proposals also, re-establishing a large merchant fleet which certainly could not be done at a modest cost. I do not have a full list but it is a remarkable one of expenditure commitments——
I should like to raise a point of order. I accede that we have a significant number of amendments for debate on the Bill and that the Minister if he wishes on the order of the Finance Bill may make all the points he wishes in regard to the cost of our amendments but it is wrong for him to introduce in the debate on our proposals all types of suggestions which do not have anything to do with the Finance Bill.
We will stay with the amendments.
The Deputy opposite cannot get up to sincerely plead, as Deputy O'Kennedy has been doing, for reduced taxation, if in another place he equally sincerely commits himself to spending huge sums of money that we do not have.
The commitments were made elsewhere and are not in that section.
I have made my point and I am sure Deputy O'Kennedy will be able to explain that in another place.
Is it in order for me to move amendment No. 12?
We are having a general debate on amendments Nos. 11, 12, 13, 14, 15 and 16 which are related.
The figure I propose in my amendments for the Minister's figures are ones which represent an increase of 7 per cent on the present figure. The reason we chose the figure of 7 per cent was because that was the amount by which it is estimated wages and salaries will rise on average this year. If those figures were accepted we would have precise indexation of the bands that are involved in section 2 for the application of the different rates of income tax. I do not see what can be wrong with seeking to index those bands and those different levels. The amounts concerned are modest. I notice that the figures proposed are even less than the figures proposed by Deputy O'Kennedy. The figures should be accepted and the Minister should not be hell bent on trying to increase substantially the amount of money which he will take from taxpayers this year by way of income tax. I am afraid that the truth of the matter is——
That is ridiculous.
——that he is hell bent on increasing very substantially the amount of money in cash terms and in real terms which he will take from income taxpayers this year.
That is nonsense.
In the Government's Estimates——
This is provocative nonsense. It is not true.
The Minister will have his opportunity to respond when the Deputy has concluded.
I am touching a nerve and I apologise if it is very sore. Certainly, it seems to be a sensitive nerve.
The Deputy is letting himself down with his flights of innocent oratory which bear no relation to reality.
I find it hard to get off the ground at all let alone to get into a flight of oratory because I am being stopped every few seconds.
Not any more.
I should like to thank the Chair. At the time of the budget the Government's figures indicated that they would get £253 million more from income tax this year, an increase of 12 per cent in the income tax bill. What has to be borne in mind is that that increase of 12 per cent in the total yield from income tax is taking place in 1986, a year when the annual rate of inflation is estimated to be 3 per cent. In other words, the additional yield of income tax is four times the estimated rate of inflation for the year. Therefore, there is a very substantial increase in the burden of income tax on the taxpayers this year in real terms and not just in cash terms. That explains the Minister's unwillingness to index the various bands, allowances and so on that would keep the burden the same in real terms as it was last year. I do not think it is asking too much of any Minister for Finance to keep the burden of income tax in real terms the same in 1986 as it was in 1985. In 1985 it was crucifying and it did enormous damage to our economy to have such rates of personal taxation and such a huge amount taken from each worker in tax. This year the amount will be substantially higher.
I am seeking to achieve the same burden in real terms as last year and I do not think that is unreasonable. Indexation is taken for granted in most other countries. If there was a failure to apply indexation in any year in Britain there would be screams. It would be rightly described as an insignificant increase in income tax in real terms. Indexation takes place regularly in Britain but here it seems to be unthinkable.
I took a note of a sentence used by the Minister some moments ago, one with which I must inevitably take issue. The Minister said that the various changes in income tax that were made in the budget and in the Bill were "relieving taxation in excess of indexation". I have given the figures which clearly show that with an increased take of 12 per cent in a year when inflation is running a 3 per cent and incomes are estimated to increase by 7 per cent — the latter is a very regrettable figure because it is more than double the rate of inflation and the Government were wrong to arrive at that sort of figure in so far as things were under their control but we are stuck with it now — the income tax take will be four times one of those figures and almost double the other one.
How can the Minister argue, therefore, that he is "relieving taxation in excess of indexation"? The position is quite the contrary. There is a huge additional burden. This happened in the past and the Minister is trying to apply the technique that his predecessor had of quoting figures in a way that would convince people in the short-term that they were going to be better off in some way. It is only when they get their pay packet after the new rules are introduced that they realise that they are substantially worse off. Their reaction to the 1985 budget was that it was great, that there were income tax cuts and that they would be better off but when April came they found they were worse off. We are finding the same now. The global figures from taxpayers as a whole show an increase of 12 per cent which is well above anything that could remotely be akin to indexation. I am seeking, in these figures, simply to try to retain indexation as best I can. That is something that would be taken for granted in any other country.
If the Minister were to do that he would still have a substantial increase in his income tax take because this DIRT tax will bring in a huge amount of money, most of it coming from people who are not liable to income tax anyway but who will be forced to pay it. If the Minister had any bona fides in regard to these matters that he has talked about often at such length, then here is his opportunity. Let him introduce indexation in so far as income tax is concerned. He will still get a huge increase in yield, mainly as a result of the DIRT tax, but at least let him not increase substantially, in real terms, the payments that will be made by ordinary taxpayers who, as we all know, are more hard-pressed than any other income taxpayers in Europe.
What Deputy O'Malley wants would cost £15.9 million in a full year. He does not seem to understand what is indexation. Indexation is moving tax allowances and bands up in line with inflation, with purchasing power, not with average incomes. If average incomes are increasing at twice the rate of inflation — which is the case, as Deputy O'Malley pointed out — the commitment to indexation is simply to increase the allowances and bands in line with inflation, not twice that amount which would be in line with average incomes. Therefore, indexation is being adhered to. That would apply in Britain or any other country where indexation is considered to be part of tax policy. It is indexation by reference to the CPI, to inflation, not reference to average incomes. In the latter situation we would have the trade union movement, pushing for higher wages for whatever group, determining tax policy. If they were able to get increases at four times the rate of inflation, the Government would be obliged to increase the tax bands by four times the rate of inflation. That is not what indexation is about. Indexation is about keeping in line with the CPI, an independently-determined figure, which takes into account the cost of living as distinct from wage increases. For that reason I have to say that Deputy O'Malley's amendment is based simply on a false understanding of what is indexation.
What about the income tax yield being four times the rate of inflation? Has the Minister any comment to make on that?
No.
The additional yield being four times the rate of inflation and approximately twice the rate of the increase in salaries.
If people's incomes are going up beyond the rate of inflation, and allowances are being adjusted in line with inflation, people will find themselves in higher tax bands but that is because their incomes, in real terms, are going up. Some of that, not all, is being handed over to the State to keep services going and, as I pointed out in reply to Deputy O'Kennedy, to service debts, some of which date back to the time Deputy O'Malley was in Government. Obviously that is a regrettable reality. But indexation is increasing the allowances and bands in line with inflation. We have done not just that. We have done more than that.
I think the Minister is being unfair to the proposals of Deputy O'Kennedy and Deputy O'Malley in trying to suggest that somehow one is seeking a £15 million giveaway and the other a £24 million giveaway. That is the impression the Minister sought to create here over the last half hour or so. We should put it in the context not so much of a giveaway to taxpayers but trying, somehow, to return to a little bit of normality rather than some sudden giveaway or handback of money to taxpayers. That is what is behind the suggestions here.
I acknowledge that the tax burden is too high.
I know the Minister acknowledges that. But it is important in the context of the Minister trying to create the impression that both amendments, one involving a figure of £15 million and the other £24 million, somehow represented fresh money we would have to give to the taxpayer. That is an unfair impression to give. In effect what we are talking about in a very marginal way is a reversal of the drift which has taken place over the past couple of years. For example, before the budget the income tax take was down as £2,260 million. As a result of the changes proposed since the budget and contained in this Bill, the take, including the levies, I calculate will rise to a figure of £2,477 million. I calculate that to be an increase of £217 million; Deputy O'Malley calculated it at £253 million. Either way it still represents an increase of 10 per cent to 12 per cent in the burden of taxation and the receipts to the Exchequer from taxation. The point has not been properly or clearly answered as to how one arrives at a situation in which the burden is increasing and yet inflation is not moving at anything like that rate.
Indeed, there are some other things at which we should be looking. It is all part of the theme being put across in this section, which is that we are not seeking something new, we are seeking a slight reversal of the nonsense that has been going on in recent years. For example, in 1982 the share of income tax in relation to total taxation was 36 per cent. It is now 41 per cent, and that in a couple of short years. Perhaps I should be even more specific and say that out of every £100 paid in income tax in 1985 the PAYE sector contributed £87, and the previous year they contributed £84. That is further evidence that the PAYE sector is supporting the whole tax structure to an unacceptable level.
I welcome the abolition of the 1 per cent cent levy; that was a sensible decision. Nevertheless, it is still estimated to bring in £36 million this year. That is a substantial income from something that is being abolished. It points to this increased burden of tax that has been continuing. I do not think the Minister needs me to dwell on that very much longer except to support the point being made from this side of the House and by Deputy O'Malley, which is that the increased burden of taxation is quite clear, of the order of 10 per cent to 12 per cent and, in that context, it is difficult to justify the Minister's approach to it.
Perhaps I might take it down to the level of the man in the street, as it were, away from those global figures. In the document accompanying the budget, the Principal Features of the Budget, we see that a married man on £10,000 would receive a reduction in tax of £100, that is, approximately £2 per week. If one substracts from that the increase in the price of petrol, value-added tax and the abolition of the £100 child allowance, I calculate — and my evidence on the ground suggests — that the average family is much worse off under the provisions of this Bill.
I might revert to what I said on the last section: within the same Bill why do we, on the one hand, give some reliefs and, on the other — it should be remembered we are not running three or four different countries, it is the same country, the same people out there — in another page of the same Bill, affecting the same people, take back immediately, as in the case of the DIRT tax from elderly people and the age allowance in the Bill itself? We must stop doing that in these Finance Bills.
One of the reports of the Commission on Income Taxation contained the remark that our taxation system was unfair, muddled and complicated. This section, indeed this Bill generally, is rendering it more unfair, muddled and complicated. I might ask the Minister to consider this: the reports of the Commission on Income Taxation are something to which most politicians have paid some lip service in recent months. I do not know if this is possible, outside the annual Finance Bill, but is it possible to bring in special legislation to deal particularly and specifically with the reports of the Commission on Income Taxation, section by section, or report by report? Is that an option available to the Minister?
The trouble is that everybody likes the reports of the Commission on Income Taxation but, when one begins inserting their suggestions in Finance Bills, they become mixed-up as part of Government policy, in the political sense and, as such, no real thought is given to what kind of progress we can make in that area. The commission made some brilliant suggestions, with some of which I would have difficulty. I should like to see a series of Bills bringing forward the suggestions contained in the reports of the Commission on Income Taxation. I should like to see them debated in that atmosphere. That would be very helpful in progressing the debate on Irish taxation which is an extremely complicated and muddled question at present.
In fairness, when the Bill was introduced in the House by the then Minister for Finance, in very difficult circumstances the Minister went quite a distance in that respect. Anybody advocating in the House today that we should implement the recommendations of the Commission on Income Taxation is really saying we should abolish income tax relief on interest paid on mortgages. I hope that is what will be recorded in the newpapers tomorrow when they quote some Deputies. We cannot take part of the report of the Commission on Income Taxation and ignore the other parts. In these amendments, if we are to take the points being made seriously, we are engaging in a Dutch auction. Deputy O'Malley went only as far as £9,630, Deputy O'Kennedy has gone to £10,000 and we should be saying: "Do we hear £12,000?"
The Deputy has not read the amendment.
Deputy O'Kennedy is very testy because he does not have control of his brief, and if somebody says something Deputy O'Kennedy does not like he is on his feet.
If I had the qualifications of Deputy Mitchell, a consultant, I would be very much in control of my brief.
The Deputy is not able to manage his brief and therefore he throws abuse around the House. If it does not cause a charge on the Exchequer or knock the taxpayer too much, the bidding might stop at £10,000. We are being ridiculous and childish. Some of the arguments put forward here today in a sincere way do not hold water. Deputy Brennan asked why the Minister is taking with one hand and giving with the other. We here have been advocating for a long time that an incentive has to be given to work rather than go on the dole. We have been looking for transfers from direct to indirect taxation and other methods, or expenditure cuts. Given the general state of the economy, people will be much better off this year than last year.
In relation to the disparity that will arise between income tax yields in the current year from the Minister's proposals and the amount of tax relief that is being given, what estimate has been made of the number of people at work? There are indications that the numbers at work are growing. Would that explain some of the disparity between the Minister's figures and those of the Opposition?
I wish to give some figures supplied to me by people whom Deputy Mitchell might describe as better informed than I. For the Deputy's information I will be quoting figures given by the Minister for Finance in reply to parliamentary questions over the years. In 1982, before the Government came to office, total tax was £4,000 million. This year, after more than three years, total tax will have reached just short of £6,000 million, an increase of 66 per cent. As Deputies have pointed out, the level of increase in income tax has been even more significant. In 1982, the yield was £1,400 million, a little more than 11½ per cent of GNP. This year the figure will be £2,351 million, 14½ per cent of GNP.
Total taxation has been increasing at an enormous rate since the Government took office but the growth of income tax is especially worrying. If the Minister acknowledges, as he said he does, that income tax levels are too high, and so are general tax levels, why in the 1983 budget did the Government decide to keep taxation at a level unprecedented here or elsewhere? They were going to eliminate the current budget deficit, and a deliberate decision was taken by the Government to increase taxation. In every sense we are suffering the consequences. If I may be allowed to say it by one who knows more than I, for Deputy Mitchell's benefit——
Would you ask the Deputy to keep to the Bill and not to be throwing personal insults? We did not provoke this sort of thing.
I thought Deputy Mitchell said I was not sufficiently familiar with my brief and that I was not able to cope with it. If I acknowledge his great personal knowledge it seems to hurt him. We will confine ourselves to the issues rather than have personal observations from Deputy Mitchell. He is here long enough to have learned a little more. He should at least have learned that the beginning of knowledge is to recognise the extent of your ignorance. That takes years. The figures I have given demonstrate that the growth of total taxation, including income tax, is of very serious concern. My figures go marginally above those of Deputy O'Malley but we are both proposing that the Minister should take the first faltering steps, at very little cost having regard to the total tax in a year. When you take total taxation of £6,000 million and the total cost of what I am proposing, £10 million, the Minister would be showing that new sense of direction if he accepted our proposals, and we would all finish in front.
I do not think what I say will make any difference to those on the other side because they have decided to follow a particular line. There are a few things I must repeat. Our scope for reducing income tax is less than elsewhere because all our income tax revenue is used up on debt servicing. We are doing better than under indexation which means increasing bands and allowances in line with inflation, which is 3.3 per cent this year. Let us compare what is being done in the budget with indexation. Let us take a single person on £6,000 a year. Under the Finance Bill provisions he will be paying about 18 per cent of his income in tax. On the basis of full indexation, he would be paying 19.75 per cent of his income in tax. Therefore, he is paying 1½ per cent less in tax than he would be under an indexation system. A married person on £6,000 a year, on the basis of full indexation, would be paying 6.8 per cent of his income in tax but under the budget he is paying 6.76 per cent.
If one wants to go a little higher in the tax bands, take a married couple with one spouse earning £15,000 a year. Under the budget scheme he will be paying 24.6 per cent of his income in tax, but if we had full indexation in line with inflation he would be paying 26.2 per cent of his income in tax. So he is paying less under the budget scheme than he would under indexation which is being vaunted by at least one of the Opposition Deputies. I have sheaves of illustrations to give, but they all indicate one thing, that we are doing better than indexation in this Finance Bill.
Deputy O'Kennedy and Deputy O'Malley want to do even more, and so do I. It would be highly desirable that we should give even greater income tax relief, but we are not as free to do that as we should like. This is, first, because practically all our income tax revenue is used up in servicing our debt and, secondly, because we have not been able to introduce sufficient economies in expenditure and, after all, we are raising the taxes in the first place to pay for things. We have not been able to reduce our spending enough to reduce income tax further. If Deputy O'Kennedy does not already know, reducing expenditure is not an easy task.
It is extremely easy to stand up at a meeting of hard pressed taxpayers and say with brilliant sincerity and perspiring intensity: "I believe in reducing public spending. I want to reduce taxation." Anybody could say that. It is another matter to take the hard decisions and make the cuts where you actually hurt people directly, and in many cases the expenditure cuts involve people losing their jobs who have mortgages and who are counting on a particular scheme or activity being continued by the Government, but find that as a result of the Government's economies it is no longer continuing. The situation is not that the tax burden is being slightly increased. It is that they have no income where previously they had one. That is what you are talking about much of the time when you are talking about cutting spending. While it is easy to get applause for calling in general terms for cuts in spending, it is not quite so easy when it comes to making the specific decisions.
Unfortunately, we have a capacity in this House to keep things general—keep talking in general terms and you will never go too far wrong. That is something of which we are all guilty from time to time. It is easy for all of us to be in favour of reduced taxation; we all are. The problem comes about in making the expenditure cuts to pay for it. Certainly there is one thing we should not do—and this is where I would make as earnest an appeal as possible to Deputy O'Kennedy, his friends, and others who have influence on public debates—we should not promise increases in spending over the next year or two. We shall be coming into the season when this sort of speech becomes fashionable. If we are to have any hope of implementing reductions in income tax in next year's budget, the budget of the year after, or the year after that again, the one thing we must start with is promising not to promise more public spending.
All right.
I want to deal with the point about the burden of taxation and the last point made by the Minister about speaking in generalities. The Minister and other Deputies have been speaking for the past hour about the burden of taxation being too high. That is a very general statement and I am sure the Minister will agree that, while the burden of taxation on some people has been too high, the burden of taxation on others has been too low and on others non-existent. The burden of taxation on personal incomes is too high and this could be narrowed down further by saying that the burden of taxation on the PAYE sector is too high because they are the only people who pay full legally imposed taxes and have no way out of it. On this section we are talking about the burden of taxation on personal incomes and, in particular, on the PAYE taxpayers. I am sure the Minister will agree, although he may not want to say it publicly, that one of the reasons for taxation being too high on these people is that the taxation on personal incomes had to be increased to take up the slack for the loss of other taxes which were abolished on property, such as rates, or wealth taxes, and that the taxes on incomes other than personal earned incomes had been reduced. There are areas even in this budget where this has been reduced under the heading of capital gains tax and various other items.
Deputy O'Malley says the tax burden increase is four times greater than the rate of inflation. He is talking about a particular sector on which the tax burden has increased four times. Some of that is due to inflation, some due to increased incomes, but some also due to the fact that they had to take on the burden dropped from other sectors. That is the unfair burden of taxation which should be spoken about, not the generality that taxation is too high. Everybody knows the actual burden of taxation on farmers has been falling——
Could I, on a point of order——
——rather than increasing. I am only giving one example.
I am not interrupting to defend the farmers. We will come to them. We are talking about income tax. It would be a help to have this item discussed and voted on.
I am talking precisely about income tax and why the burden of taxation on personal incomes has increased to such an extent. These are matters which have been covered up or hidden by other speakers. Deputy Gay Mitchell—his brother may not wish to be responsible for all the remarks he makes, so I want to distinguish between the two——
The Deputy may spell it out.
Could the Deputy at this point yield and let a vote be taken?
All right. I agree.
There is one thing. There may be a danger that Members might mistake the bell for Question Time.
I am pressing my amendment.
I agree, so long as the point I am making is clarified and the Minister accepts that the burden of taxation is the specific point.
I am a little amazed at Deputy Mac Giolla talking about property taxes when I compare that with his opposition to water rates, which were a very modest tax.
In addition to the water taxes.
The Deputy is somewhat inconsistent.
Question put: "That the figure proposed to be deleted stand."
The Committee divided; Tá, 59; Níl, 56.
Tá
- Barnes, Monica.
- Barrett, Seán.
- Bermingham, Joe.
- Birmingham, George Martin.
- Boland, John.
- Bruton, John.
- Bruton, Richard.
- Burke, Liam.
- Carey, Donal.
- Collins, Edward.
- Conlon, John F.
- Coogan, Fintan.
- Cooney, Patrick Mark.
- Cosgrave, Liam T.
- Cosgrave, Michael Joe.
- Coveney, Hugh.
- Creed, Donal.
- Crotty, Kieran.
- Deasy, Martin Austin.
- Desmond, Barry.
- Desmond, Eileen.
- Dowling, Dick.
- Doyle, Avril.
- Doyle, Joe.
- Dukes, Alan.
- Durkan, Bernard J.
- Enright, Thomas W.
- Fennell, Nuala.
- FitzGerald, Garret.
- Flaherty, Mary.
- Flanagan, Oliver J.
- Barry, Peter.
- Begley, Michael.
- Glenn, Alice.
- Griffin, Brendan.
- Hegarty, Paddy.
- Kavanagh, Liam.
- Kenny, Enda.
- L'Estrange, Gerry.
- McGinley, Dinny.
- McLoughlin, Frank.
- Manning, Maurice.
- Molony, David.
- Moynihan, Michael.
- Naughten, Liam.
- Noonan, Michael. (Limerick East)
- O'Brien, Fergus.
- O'Brien, Willie.
- O'Keeffe, Jim.
- O'Sullivan, Toddy.
- Pattison, Séamus.
- Quinn, Ruairí.
- Ryan, John.
- Sheehan, Patrick Joseph.
- Skelly, Liam.
- Taylor, Mervyn.
- Taylor-Quinn, Madeline.
- Timmins, Godfrey.
- Yates, Ivan.
Níl
- Ahern, Michael.
- Andrews, David.
- Barrett, Michael.
- Brady, Vincent.
- Brennan, Mattie.
- Brennan, Paudge.
- Brennan, Séamus.
- Briscoe, Ben.
- Browne, John.
- Burke, Raphael P.
- Byrne, Seán.
- Calleary, Seán.
- Collins, Gerard.
- Conaghan, Hugh.
- Connolly, Ger.
- Coughlan, Cathal Seán.
- Cowen, Brian.
- Daly, Brendan.
- De Rossa, Proinsias.
- Doherty, Seán.
- Fahey, Francis.
- Fahey, Jackie.
- Faulkner, Pádraig.
- Fitzgerald, Gene.
- Fitzgerald, Liam Joseph.
- Flynn, Pádraig.
- Foley, Denis.
- Gallagher, Denis.
- Gallagher, Pat Cope.
- Geoghegan-Quinn, Máire.
- Harney, Mary.
- Haughey, Charles J.
- Hilliard, Colm.
- Hyland, Liam.
- Kirk, Séamus.
- Kitt, Michael.
- Lenihan, Brian.
- Leonard, Tom.
- Leyden, Terry.
- Lyons, Denis.
- McEllistrim, Tom.
- Mac Giolla, Tomás.
- Moynihan, Donal.
- Noonan, Michael J. (Limerick West)
- O'Connell, John.
- O'Dea, William.
- O'Keeffe, Edmond.
- O'Kennedy, Michael.
- O'Leary, John.
- O'Malley, Desmond J.
- O'Rourke, Mary.
- Power, Paddy.
- Walsh, Joe.
- Walsh, Seán.
- Wilson, John P.
- Wyse, Pearse.
Tellers: Tá, Deputies F. O'Brien and Taylor; Níl, Deputies V. Brady and Browne.
Question declared carried.
Amendment declared lost.
Progress reported; Committee to sit again.