Vol. 441 No. 8
10 Mr. Allen asked the Minister for Social Welfare the proposals, if any, he has to introduce alleviation measures to help persons whose family incomes have been reduced suddenly and substantially by the decisions to tax disability benefit and unemployment benefit payments coupled to the decision to reduce tax relief on mortgage interest.
Disability benefit has been reckonable as income for tax purposes since 6 April 1993. In this year's budget, the Minister for Finance announced that unemployment benefit would become reckonable as income for tax purposes from 6 April 1994. As a result people on the same level of income are now treated in the same way for tax purposes, irrespective of the source of that income.
Under the new system, which came into effect on 6 April 1994, my Department will continue to pay unemployment benefit directly to the recipient without deduction of income tax.
The Revenue Commissioners take account of unemployment benefit when dealing with claims to refunds of tax after a person becomes unemployed, when employment is resumed, or when reviewing the tax affairs of recipients or their spouses. The extent to which a tax liability arises will depend on other income that recipients or their spouses receive in the same tax year. This system is similar to the one in existence for payment of disability benefit since last year. A liability to tax only arises where there is income in addition to the benefit payment.
In his statement on the publication of the Finance Bill the Minister for Finance announced that in recognition of the special circumstances of workers who on 5 April 1994 were participating in a systematic short-time working arrangement, such workers will be temporarily exempted from the new tax arrangements for the duration of their current unemployment benefit claim or to the end of the tax year, whichever is the earlier.
Does the Minister not realise that these cuts severely hit the most marginalised in society? Would he agree he is selectively implementing the recommendations in the report of the Commission of Social Welfare? That report made many recommendations which the Minister has not implemented. Would the Minister accept that in some cases family income has been reduced by £30 to £50 per week and that this is a severe jolt to families on the breadline? Would the Minister consider an alleviation payment to these people? May I ask——
The Deputy's questioning is too long.
The Deputy is somewhat exaggerating the figures, but that is not my responsibility. The taxation of disability benefit has been in operation for over a year and the taxation of unemployment benefit has been introduced recently. In all of these cases, the basic payment is made to the beneficiary and taxation would arise where people have additional income over and above that. It is highly unlikely that it would arise otherwise.
The Minister's reply is an indication of how out of touch he is with his colleague, the Minister for Finance. I know of a case where a person's tax free allowance has been reduced from £150 to £48 per week.
The Deputy seems to be quoting.
I am not quoting. I am simply responding to the Minister's allegation that I am exaggerating.
The Chair has eyes to see.
How can the Minister reconcile a reduction such as this to families in the same year that a tax amnesty was given to tax evaders and people who are breaking the law?
The Deputy is introducing quite a lot of extraneous matter.
Will the Minister respond to the comments made by his Minister of State in the Pretty Polly plant in Killarney that she was reconsidering the taxation of unemployment benefits?
That is the announcement that was made.
Those people who were on systematic short time were given a two year period to adjust to the new situation.
It is still the same.
The Minister of State explained that the position of people in that situation was being examined. I also spoke in the House at that stage, as did the Minister for Finance who said that certain aspects were being examined in terms of its immediate introduction. This was a particular issue within the transfer and arrangements have been made to cover that.
In regard to the question raised by the Deputy on the Commission on Social Welfare's recommendation regarding the taxation of these benefits, I want good, basic social welfare benefits and payments. Taxation applies in many ways; widows pension, old age pension, invalidity pension and others are taxable but one is not taxed unless one has additional income. My philosophy has been to have good pensions in the first instance. If the taxation, which applies to everybody, claws back some of the additional income, that is fair and equitable across the board.
Provided the levels are high enough.
That is what we have done in relation to the report of the Commission on Social Welfare. There is another question on that later. We have consistently increased the rates and we will continue to do so. We have passed all the priority rates this year. Many of the payments are now 95 and 96 per cent of the main rate which was proposed and we will exceed those rates.
