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Dáil Éireann debate -
Wednesday, 16 Nov 1988

Vol. 384 No. 3

Written Answers. - Tax Relief.

58.

(Limerick East) asked the Minister for Finance the total amount of tax which would accrue to the Exchequer if tax relief was granted at the standard 35 per cent rate rather than at the marginal tax rate under the following headings: (a) mortgage interest relief (b) tax relief on health insurance premiums (c) tax relief on life insurance premiums (d) PAYE allowances and (e) PRSI allowances; and in each of the tax years 1988-89 and 1990-91 the further revenue which would accrue under these headings for (a) each 1 per cent reduction in the standard rate (b) each 1 per cent reduction in the 48 per cent rate and (c) each 1 per cent reduction in the 58 per cent rate.

Statistics are not available which would enable the information requested in respect of 1990-91 to be provided. The full year yield to the Exchequer, estimated by reference to the income tax year 1988-89, arising from confining tax relief to a maximum rate of 35 per cent is as follows:

Restriction of certain allowances and reliefs to the standard rate of income tax

Estimated yield to the Exchequer

Allowance or Relief

1988-89

£ million

Loan interest

23.4

Medical insurance (VHI)

6.8

Life assurance

6.8

Employee (PAYE)

46.0

PRSI

14.2

The additional yield representing the reduced cost to the Exchequer from allowing the reliefs in question at the lower standard rate of 34 per cent is set out in the following table. It should be noted, however, that the additional yield shown would be more than outweighed by the cost of reducing the standard rate to 34 per cent. The question of a corresponding additional yield to the Exchequer from reductions in the 48 per cent rate and the 58 per cent rate does not arise in the context of the tax scheme mentioned as it provides for relief at the standard rate only.

Additional yield to the Exchequer

Allowance or Relief

1988-89

£ million

Loan interest

3.8

Medical insurance (VHI)

1.0

Life assurance

1.1

Employee (PAYE)

6.5

PRSI

1.9

The figures given in the tables are compiled on the basis that the application of either the standard rate of income tax or of a reduced rate of 34 per cent would not have altered the behaviour of taxpayers availing of the allowances and reliefs in question.

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