I propose to take Questions Nos. 6 and 27 together.
In the current tax year 1996-97 it is estimated that a single employee, full rate PRSI contributor, earning the average industrial wage, will pay almost 29.3 per cent of his or her earnings in income tax, PRSI and levies. This is referred to as the average tax burden. Such a taxpayer will pay the 48 per cent income tax rate on £1,719 of his or her earnings and PRSI on £10,409.
A single self-employed taxpayer, on the same income level, will pay 32.6 per cent of his or her earnings in income tax, PRSI and levies. The self-employed taxpayer will pay the 48 per cent income tax rate on £2,519 of his or her earnings and PRSI on £13,529.
As a result of the improvements announced in this year's budget, it is estimated that the average tax burden for a single employee on the average industrial wage will fall to below 27.2 per cent in 1997-98, even after allowing for wage increases. The amount of his or her income subject to the 48 per cent income tax rate will decline to £1,406. For a single self-employed taxpayer the comparative figures are 31.1 per cent and £2,206.
The Government's policy in relation to taxation is set out in the programme for renewal. The programme stresses the need to reform the tax system, in particular to relieve the tax and PRSI burden of those on low incomes. Tax reform will favour the incentive to work, tackle the poverty trap, aim to reduce the tax wedge and encourage enterprise development. The Deputy will also be aware that section 3.9 of Partnership 2000 states: "The Government will introduce personal tax reductions to the cumulative value over the three years of £900 million on a full year cost basis".
The first steps towards implementing this undertaking were taken in my recent budget. The measures introduced include increasing personal allowances by £250 in the case of a single person and £500 for a married couple, the largest increase in personal allowances since 1984; increasing the general income exemption limits by £100 single and £200 married; reducing the standard income tax rate by 1 per cent to 26 per cent; widening the standard rate tax band by £500 single and £1,000 married; reducing by 1 per cent the employee full rate PRSI contribution, which is paid by slightly over 70 per cent of PRSI contributors; increasing the income threshold for payment of the health and employment and training levies by £500 to £10,250 or to £197 per week. These measures will continue to reduce the tax and PRSI burden on employment and the average tax wedge, thereby making employment more attractive.
Of course more needs to be done, and it is the Government's policy to continue, within responsible budgetary parameters, the process of reducing the tax and PRSI burden on earned income as an important element in overall strategy. The personal tax reductions introduced in this year's budget amount to £393 million on a full year cost basis. The remainder of the £900 million agreed for personal tax reductions under Partnership 2000 will be provided in the 1998 and 1999 budgets. The precise measures to be introduced in those two budgets are, of course, a matter for consideration by the Government in the run up to each of those two budgets.