asked the Minister for Finance the average yearly saving to PAYE workers arising from the income tax proposals in the Programme for National Recovery.
Ceisteanna—Questions. Oral Answers. - Taxation Proposals.
2.
The exact manner in which the income tax proposals contained in the Programme for National Recovery will be implemented will be considered by the Government in the context of the 1988 and subsequent budgets. It is not possible, therefore, at this stage to indicate the average yearly saving to PAYE workers in each year of the programme from these proposals. However, the overall package of £225 million will result in total savings of about £295 for the average PAYE taxpayer over the period of the programme.
I can accept the Minister's statement that until the budget we cannot have exact figures. He does give a figure of an average of £295 per taxpayer. Since the average amount paid by PAYE workers has increased — the figures that I have are that in 1982 they amounted to £1,672 and in 1986, to £2,768 on average, the latter increase——
Deputy Mac Giolla is now making a statement. Would he ask a question, please?
In view of that continuous increase, is the Minister saying now that the 1988 figures will show an actual reduction of £295 on that average yearly take from PAYE taxpayers?
I do not think that the Deputy heard what I said, which was that the overall package of £225 million will result in total savings of about £295 for the average PAYE taxpayer over the period of the programme.
That is over a three year period?
Yes.
So that is about £70, or £80 a year?
To work it out annually you will have to wait and see at budget time.
Would the Minister agree that it is quite extraordinary that for the first time in the history of the State a Minister for Finance has told the House that the average tax benefit for each of the next three years will be £295, or £98 per annum, or for a single PAYE worker, £1.18p a week and a maximum £2 for a married person? Would he regard an alleged concession of that nature as being utterly derisory? In fact, over the period it will result in a net increase of payment of income tax by PAYE workers.
All I can say is that the Deputy is entitled to his opinion. It might, however, be no harm for all of us to recall the fact — and we accept it — that income tax and taxation generally are too high but the level of borrowing we have in this economy amounts to £1,858 million, which is the extent to which we as a community as a whole are living beyond our means and until such time as we drastically reduce that amount we cannot, unfortunately, be talking about any greater concession than what was negotiated and discussed by the social partners and agreed by them for the next three year period, as I outlined in my reply.
Would the Minister not agree that far from this being a much lauded concession it would have been more honest for the Minister and the Taoiseach and his colleagues to have said that it was purely a token payment which, in effect, is not a taxation relief at all and that on the basis of £1.18p per week for a single worker, the figure is so low that it would hardly be worth putting into any programme? Far from being the great concession and great gain that the Government are alleging——
The Deputy is making a speech. We must progress.
——in fact, it is the absolute minimum——
We are moving on to Question No. 3.
I am sorry if the Deputy is disappointed that the trend is downwards.
I am putting it in its correct context.
I would ask the House to agree that Question Time deals with seeking information. It has been given. It does not refer to debating particular issues. You are all aware of that.
Would the Minister agree that the Taoiseach's speech on the Estimates which stated that there would be a reduction——
The Taoiseach's speech on the Estimates would not come into the question. I am moving on to Question No. 3.
If you would permit me to finish my question——
The Taoiseach's statement——
I am entitled to ask the question that I was going to ask.
You are not entitled to ask questions that do not refer to the information given.
It was precisely with regard to the £225 million mentioned that I was going to ask a question.
Then would the Deputy please ask the question and not be too long?
Would the Minister agree that there is no reduction in income tax planned by the sum of £225 million? The most that can be said is that there is a halt in its projected growth by the sum of £225 million over the next couple of years. Is that not the reality?
We will have relief to the extent of £225 million over the three years.
But it will continue to grow.
I call Deputy Mac Giolla as a colleague of Deputy Sherlock and then a final question from Deputy Noonan.
This is specifically on the question of the £225 million over the three years. In view of the fact that there is to be a 2½ per cent increase in wages to PAYE workers, is it not a fact that there will actually be an increase in take from these workers over the period of 3 years rather than a reduction, that it will be higher in three years' time than it is now?
That does not alter the fact that this concession is being given.
(Limerick East): Is it the Minister's intention to use the total of £225 million for relief of income tax for PAYE workers exclusively and will there be any relief for other income tax payers?
That will be a matter for budgetary decision on the day.
(Limerick East): It could be less?
We will await that decision. It is there in global terms.
3.
asked the Minister for Finance if he will define the terms net income and gross income as assessed for income tax purposes in respect of self-employed persons and farmers; the number of such persons; the number currently liable for income tax; the estimated amount to be paid by them in 1987; and if he will make a statement on the matter.
The terms "net income" and "gross income" are not used in the Income Tax Acts and are not legal tax terms. The terms "total income" and "taxable income" are, however, used in this context. These are technical terms relating to certain steps in the process of determining a person's tax liability. In relation to the self-employed, which term includes farmers, "total income" broadly means an individual's income from all sources reduced by such items as capital allowances, interest, losses, pension contributions, etc. "Taxable income" is the income on which the individual's charge to tax at the prevailing tax rates is actually calculated. It is total income further reduced by the various personal allowances and reliefs.
As regards the figures requested by the Deputy, the relevant statistics available are in respect of the income tax year 1986-87. From figures contained in Table 14 of the results of the 1985 Labour Force Survey, published in September 1986, it is estimated that 129,500 farmers were chargeable to income tax in respect of the tax year 1986-87. This comprises some 119,000 full time farmers together with a further 10,500 farmers, who, or whose spouses, carry on another trade or profession.
It is estimated that some 81,400 self-employed persons other than farmers were chargeable to income tax in 1986-87. The number of self employed persons including farmers who are ultimately expected to make tax payments in respect of 1987-88 is provisionally estimated at 110,000, of which the number of farmers is tentatively estimated to be of the order of 27,000.
The post-budget estimate of income tax to be paid by farmers and other non-PAYE taxpayers in 1987 is £35.5 million and £226.1 million respectively.
Can the Minister tell us why the terms "net income" and "gross income" were used in the Programme for National Recovery and why these terms were particularly impressed on both the trade union and farmer leaders when, as he correctly concedes now, the Income Tax Act states that the phrases “total income” and “taxable income” should be used?
I would like to say that neither of those phrases were used in the Programme for National Recovery. The programme stated that the Government have decided to introduce PRSI for farmers and the self-employed in 1988 on the basis of income as assessed for income tax purposes.
Would the Minister not agree that the Taoiseach in contacting the Irish Congress of Trade Unions assured them that farmers would pay a higher rate of PRSI on their net income and on that basis the Irish Congress of Trade Unions finally signed this so-called Programme for National Recovery? The Minister went on radio and spoke about taxable income and the IFA deliberately used the phrase “gross income” to suit their own purposes. A very serious deception was deliberately perpetrated by the Taoiseach to the Trade Unions and the farmers in order to get them to sign the programme. As a result, there were many different interpretations put on what this scheme is going to cost the Exchequer. Would the Minister concede that the Taoiseach put him in an unsustainable position?
May I answer the question now?
You may.
The Deputy must think that the trade unions and the farmers are very naive if he thinks that they have been misled in the way he has outlined. Quite clearly, what the programme said, what the Taoiseach and I also said and what the people fully understand is that we will introduce PRSI for farmers and the self-employed on the basis of income assessed for income tax purposes. I have been very careful when speaking about this to use exactly those terms. What should be understood is that the precise details of the arrangements that will be worked out regarding PRSI for the self-employed, which includes farmers, are still under consideration and that what must be accepted and realised is that we are now extending the payment of pay-related social insurance to these categories.
May I make a final observation?
Certainly, not an observation. A question, please.
Would the Minister not agree that the IFA have persistently said that the Government and the Taoiseach agreed that PRSI would be paid on the basis of net income. Both the Taoiseach and Mr. Rea are on the record in that regard. Would the Minister not agree that a deception was perpetrated on that occasion?
The Deputy should realise that he is enlarging on the question——
I am trying to get the truth.
——to the extent that dúirt bean liom go ndúirt bean léi and this is not provided for in Question Time. Deputy McDowell.
Dúirt An Taoiseach go ndúirt Mr. Rea.
A Leas-Cheann Comhairle, I think you will have to apply the hearsay rule here. Can the Minister tell us whether it is proposed to charge PRSI on income inclusive or exclusive of deductions, say, for pensions? In other words, would it be open to a farmer or another self-employed person to make his deductions for his pension contributions and then pay PRSI on the balance or will he have to pay it on his gross income before making those arrangements for his retirement?
As I said earlier in reply to another supplementary question, the precise details of these arrangements are still under consideration and until they are finalised I am not in a position to answer any of those detailed questions.
(Limerick East): When the Minister eventually organises this scheme will it be his intention that the contributions would finance the subsequent eligibility?
That is what will be intended in any pay-related social insurance scheme.
(Limerick East): That is not the way the current scheme operates.
That is what will be intended when the scheme is introduced.
(Limerick East): Therefore, is the Minister saying that he is going to take sufficient funds from both the farmers and the self-employed to fund in-toto any subsequent benefits which they might achieve?
That will be the intention and was the intention——
(Limerick East): That is the intention but it is not the reality.
——when the pay-related social insurance scheme was introduced.
The farming community hold a different view.
I know the Deputy is very disappointed that we have done something that he wanted to do for four and a half years but never did.
I am not disappointed.
The Deputy should stop acting like a little baby who has lost his little toy. That is his problem. In relation to the question which was asked by Deputy Noonan, the intention is as I have said, that it would pay for itself. The final details are still under consideration and have yet to be concluded.
It is the Chair's intention to now move on to the next question. We are not going to spend the whole day on one question.
(Limerick East): May I ask a supplementary question? Can I take if from the information which the Minister has given the House that the Government are thinking in terms of getting a 15 per cent contribution?
The Minister is nodding his head.
Question No. 4.
The precise details have not yet been worked out but when they are I will publicise them.
Question No. 4. I am sure I speak for all the Members of the House when I say that we regret the circumstances under which the Deputy who has tabled the question is not present. We send him our best wishes.
I am glad that you have reminded us all of that fact and we wish Deputy Cluskey well.
4.
asked the Minister for Finance the plans, if any, there are to give the tenants of private rented flats and houses a tax allowance against their PAYE receipts for certified rent paid in a manner not dissimilar to that currently enjoyed by mortgage holders; and if he will make a statement on the matter.
Income tax relief is already available for rent paid by persons aged 55 years or over in respect of private tenancies up to a maximum of £750 in the case of a single person or £1,500 in the case of a married man assessed to tax in respect of his own and his wife's combined income. I have no plans to introduce a scheme of relief along the lines suggested by the Deputy.
Can the Minister tell us whether an estimate has been prepared in his Department as to the cost of extending the scheme? Would he not agree that it is both anomalous and regressive that council tenants who have opted for the purchase scheme can offset their new payments against their tax while their neighbours who are living under the same circumstances cannot offset their rents against their tax?
It is a concession. About 2,500 taxpayers claimed relief under the present scheme but the potential number of claimants is probably much higher. The cost to the Exchequer at present is £1 million. In regard to the possible cost of extending it right across the board we are told that 200,000 taxpayers are in rented accommodation and if the average cost per person in terms of tax foregone remains at its present level of £400 per annum, despite the increase in the limits, the cost of the proposal could be over £80 million a year.
Have the Minister's Department gone to the trouble of setting a notional figure and multiplying it by the 200,000 net payers? Have they gone a little further in examining the other part of my question and do they not agree that it is anomalous and regressive to allow people in similar circumstances by virtue of their ability to own property to enjoy cash benefits and to tell other people that because they have no such resources and are simply tenants they cannot get tax benefits? Does he agree that it is anomalous and regressive to exclude rent tenants?
I introduced the scheme myself in 1982 for those over 65 and it has been reduced since then to the age of 55 years. As I said in my reply, I have no plans at the moment to introduce any further reliefs in this regard.