Dáil Éireann debate -
Wednesday, 10 Nov 1993

Vol. 435 No. 7

Ceisteanna—Questions Written Answers. - County Enterprise Development Programme.

Michael McDowell

Question:

6 Mr. M. McDowell asked the Minister for Finance if his attention has been drawn to the detrimental effect the imposition of PAYE tax on all new participants of the Community Enterprise Development Programme is having on the scheme, the retention of which would further socially exclude those who would most benefit from participating in this programme, namely the long term unemployed; and if he will make a statement on the matter.

Frances Fitzgerald

Question:

9 Ms F. Fitzgerald asked the Minister for Finance if his attention has been drawn to the fact that the imposition of income tax on all new participants in CEDP schemes can only have a detrimental effect on the future success of the programme and will further socially exclude those who would benefit most from participation in this programme, namely the long term unemployed; and if he will make a statement on the matter.

Minister for Finance (Mr. B. Ahern)

I propose to take Questions Nos. 6 and 9 together.

As part of theProgramme for Economic and Social Progress (PESP) the Government introduced in October, 1992 a temporary employment/training scheme to enable people who are long term unemployed to re-enter the labour market. As a result of this, Community Employment Development Programme (CEDP) Projects were introduced on a pilot basis only in 12 defined geographical areas known as “PESP pilot areas”.

A special tax exemption was agreed on the administrative basis for CEDP on a trial basis to facilitate the pilot scheme. It was never intended that these arrangements would continue in the long term. It was made clear that if tax exemption were to be given to CEDP projects outside the pilot scheme legislation would be required. Approximately 4,000 participants have taken part in the scheme since it was introduced just over a year ago.

As the pilot period has now ended income from any project commencing or being renewed under a new contract with FÁS on or after 1 October 1993 is tax able. The Revenue Commissioners are not prepared to agree to extend the pilot administrative arrangements to any additional CEDP projects commencing after 1 October 1993. The experience with the scheme gave rise to concerns that tax exemption to CEDP participants on a wide scale could give rise to distortions in the tax system. The Government's general tax policy is that all income from whatever source should be taxed on an equal basis. However, for projects in existence at 30 September 1993 the operation of PAYE will only apply from the date of the next contract.

I would like to point out that persons whose sole incomes are from the CEDP will in many cases not be subject to income tax. The extent to which tax will actually arise on CEDP payments in practice will in many cases depend on what other taxable income a participant in the scheme (or his or her spouse) has in a particular tax year.