asked the Minister for Finance if he is aware of a report (details supplied) which showed that in relation to a married earner with two children on the average industrial wage, deductions in respect of income tax had increased from 10.3 per cent of gross wages in 1969-70 to 27.3 per cent of gross wages in 1985-86; if, in the light of these figures, he intends to introduce any measures to ease the burden of taxation on PAYE workers; and if he will make a statement on the matter.
Ceisteanna—Questions. Oral Answers. - PAYE Tax Burden.
14.
I am aware of the report mentioned by Deputy De Rossa. The Government are of course, conscious of the increasing burden of income tax which has been borne by taxpayers in recent years. The national plan Building on Reality 1985-87 committed the Government to policy measures aimed at halting the escalation of the tax burden and undertook that, over the period of the plan, tax bands and allowances will be adjusted each year so that the overall income tax burden on taxpayers will not increase. The income tax changes announced in the 1986 budget go far beyond this commitment.
I have the same problem as Deputy Lenihan.
I will read the reply again.
Can the Ceann Comhairle ask the Minister to read the answers properly so that we can hear and understand them? With the way he is mumbling and the speed at which he is replying we cannot understand him.
I will not allow further use of the word "mumbling". The Minister has offered to read this answer again.
I am delighted. The Minister initiated this great Parliamentary reform——
The Deputy is now wasting time. I am aware of the report mentioned by Deputy De Rossa. The Government is, of course, conscious of the increasing burden of income tax which has been borne by taxpayers in recent years. The national plan Building on Reality 1985-87 committed the Government to policy measures aimed at halting the escalation of the tax burden and undertook that over the period of the plan tax bands and alowances will be adjusted each year so that the overall income tax burden on taxpayers will not increase. The income tax changes announced in the 1986 budget go far beyond this commitment.
Is the Minister aware that the report gave the example of married people with two children earning three quarters of the average wage who paid nearly three times as high a percentage of their wages in tax in 1985-86 as they did in 1969-70 whereas on the higher bracket the tax percentage of a similar family with twice the average wage had doubled in that time? Therefore, the burden was even more heavily on the lower paid workers. This has led to a serious erosion in the real take home pay which has declined significantly. Does the Minister accept that the Building on Reality programme will not recoup the significant losses since the years 1973-74. What steps is he taking to ensure that they are recouped?
It is very well known that the burden of income tax has increased in recent years. Anybody who needs to put down a parliamentary question to discover that is not fully up to date. The reason for this is also well known. Our entire income tax revenue, virtually without exception, has to be used to service debt. This is because of debts run up by successive Governments on both sides of the House. It is because Government spending is greater than Government revenue and has been since 1972.
1973.
I would regard the income tax burden at present as being too high, certainly in so far as the ordinary medium paid and lower paid workers are concerned. Until we can succeed in reducing the services for which we use income tax, namely, the service of debt and payment for services that we enjoy as a community, we are going to face considerable problem in reducing the income tax burden.
The income tax reductions in this year's Finance Bill are better than those indicated in Building on Reality, where we indicated that we would not increase the burden of income tax — in other words, mere indexation in relation to inflation. In this year's Finance Bill the reliefs granted to income tax payers are twice what they would be under indexation — we are giving more relief in income tax than would be justified by the increase in the rate of inflation. We are doing better than was presaged in Building on Reality.
Would the Minister agree, arising from his dissertation on taxation resulting from——
Would the Deputy avoid using provocative language?
He could not be provocative if he tried.
We have had a dissertation from the Minister on financing borrowing repayments to deal with budget deficits. Would he agree that this practice commenced with Deputy Richie Ryan as Minister for Finance in the Finance Act and budget of 1973 and that the slippery slope on which we have been engaged since commenced then? Is that not the history in this regard in the past 15 years?
I have to disagree with the Deputy, and it comes very hard for me to do it, particularly in regard to his historical allusion. We were both in the House in 1972 when the first budget deficit was introduced with great flourish as if it was an imaginative gesture by the then Minister for Finance, a member of the Deputy's party — I am not so sure he would be a member of that party today if he were here.
I am talking about April 1973.
(Interruptions.)
On what basis does the Minister decide that the take from income tax should go to the service of the public debt and that all other taxes should go for other purposes? Am I correct in saying that the take from income tax goes for payment of social welfare benefits and health and education benefits? How will the burden on the PAYE people be reduced if the Minister will not increase taxes in other areas, such as capital, wealth and property?
The position is that the amount we have to pay in debt servicing is slightly less than the amount we raise in income tax, but virtually all of our income tax revenue has to be used in servicing debts. The result is that the country has to be run on VAT and excise duties. That is regrettable. It happens because of the necessity to service debt and it points to the danger involved for any Government of any political persuasion to think that borrowing in the short term will provide a long term answer to our problem. All it provides is long term problems.
I should like to know from the Minister what proposals he has to implement the five detailed reports of the Commission on Taxation.
The trouble is the Coalition Government in the seventies went stark raving mad.
This question relates to a report in the Industrial Relations News and it would be going beyond the confines of the question if I started to answer questions about other reports.