Written Answers. - Tax Reduction Costs.

Michael Ahern

Question:

160 Mr. M. Ahern asked the Minister for Finance the cost in a full year of a 1 per cent reduction under all tax heads; and if he will identify each separately. [17023/96]

It is presumed that the question relates to a reduction of one percentage point in the rates of each of the taxes and duties mentioned. The cost of the rate changes requested in so far as it is available, is:

Reductions of 1 per cent in tax rates

Taxhead

Estimated Cost to the Exchequer

Full year

£m

Income Tax

139.5

Value Added Tax

109.0

Excise

39.3

Corporation Tax

19.0

Stamp Duties

17.5

Capital Acquisitions Tax

6.5

Residential Property Tax

8.0

Capital Gains Tax

1.1

All Taxes

339.9

A large number of rates apply to Customs duties and an estimate of the cost to the Exchequer from applying a 1 per cent reduction to each rate could be supplied only at disproportionate cost.
The budget estimate for Customs duties in 1996 is £201 million and a decrease of 1 per cent on this basis would produce a fall in yield of £2 million. However, as 90 per cent of the Customs intake each year forms part of Ireland's contribution to EU own resources, only 10 per cent is retained here. In the circumstances, the loss to the Irish Exchequer resulting from a 1 per cent cut in yield would amount to just £0.2 million.
Notes:
(1) The figure of cost shown for income tax is based on reducing the current rates of 27 per cent and 48 per cent to 26 per cent and 47 per cent, respectively.
(2) The figure of cost for VAT is based on reducing the current standard rate of 21 per cent to 20 per cent.
(3) The figure of cost for Excise is based on a reduction of 1 per cent in the specific duties per volume applicable to most excisable commodities together with a reduction of 1 percentage point in thead valorem rates applying to certain other goods such as cigarettes and for most of the vehicle registration tax categories.
(4) The figure of yield for corporation tax is based on reducing the standard rate of 38 per cent to 37 per cent.
(5) The figure of cost shown for stamp duties is based on reducing the current 6 per cent rate on property transfers to 5 per cent.
(6) The figure of cost for capital acquisitions tax is based on reducing the 40 per cent rate to 39 per cent and includes the cost of reducing probate tax from 2 per cent to 1 per cent. As data is not available to enable a reliable costing to be made, this figure is tentative.
(7) The figure of cost for residential property tax is based on reducing the current rate of 1.5 per cent to 0.5 per cent.
(8) The figure of cost for capital gains tax is based on reducing the standard rate of 40 per cent to 39 per cent.
(9) The estimates for income tax, corporation tax and capital gains tax are forecasts based on 1997-98 projections. All other estimates are based on the estimated position for 1996.

Michael Ahern

Question:

161 Mr. M. Ahern asked the Minister for Finance the cost of reducing the standard rate of tax by 1 per cent and the marginal rate of tax by 1 per cent. [17024/96]

Michael Ahern

Question:

162 Mr. M. Ahern asked the Minister for Finance the cost of widening the standard rate band by 1 per cent and the marginal rate band by 1 per cent. [17025/96]

I propose to take Questions Nos 161 and 162 together.

It is presumed that the references in the questions to the marginal rate relate to the top rate of 48 per cent for income tax. On that basis, I am informed by the Revenue Commissioners that the full year costs to the Exchequer, estimated by reference to the income tax year 1997-98, of the changes mentioned by the Deputy are estimated as follows:

Change

Full year cost

£

Reduce standard rate from 27% to 26%

89.5

Reduce top rate from 48% to 47%

50

Widen the standard rate band by 1% (i.e. by £94 single/£188 married)

12

These estimates are provisional and are likely to be revised.

Michael Ahern

Question:

163 Mr. M. Ahern asked the Minister for Finance the estimated cost to the Exchequer of reducing corporation tax to 27 per cent for businesses with profits of less than £100,000. [17026/96]

The full year cost of reducing the current corporation tax rate of 30 per cent to 27 per cent for all companies on the first £50,000 of profits and increasing this band to £100,000 is estimated at £25 million in a full year. The full year cost of introducing a 27 per cent corporation tax rate confined solely to those companies with profits of £100,000 or less, is put at £10 million.