Written Answers. - Tax Relief.

Noel Ahern

Question:

74 Mr. N. Ahern asked the Minister for Finance whether a married man with one child on a wage of £167.50 per week, with a tax free allowance of £174 per week, whose employer wishes to give him an increase in line with other employees, will be worse off in view of the fact that he feels the increase of £20 will result in him coming into the tax net of 40 per cent, the loss of his family income supplement of £15 per week, the loss of his medical card, a reduction in the rent subsidy currently available to him on his shared ownership loan, the loss of his £3 fuel allowance, thus leaving him £15 to £20 worse off per week. [9389/97]

The position of a married man with one child earning £167.50 per week whose employer is considering increasing his salary by £20 per week is outlined in the table below.

The figures include the changes announced in the 1997 budget.

£

£

Gross Wage p.w.

167.50

187.50

Less

PRSI

3.94

4.84

Income Tax

5.40

Levies

Sub-total

163.56

177.26

Plus

FIS

24.86

13.40

Fuel Allowance

3.00

3.00

Rent Subsidy (Shared Ownership)

14.42

7.70

Medical Card Value

5.54

Total

211.38

201.36

Notes:
(1) It is vital in interpreting this table that the mechanism for reviewing both the family income supplement and the rent subsidy under the shared-ownership scheme is understood. FIS is renewable on a 12 monthly basis: once awarded it will not be reduced or withdrawn until the end of the period, regardless of any upward movement in pay during that period. The rent subsidy under the shared ownership scheme operates in much the same way: all cases are reviewed annually (in July) and the rate for the coming year is based on the income of the recipient in the previous tax year. Therefore, gross income from employment can increase significantly during the course of a year while adjustments to both FIS and the rent subsidy may not occur until some time later.
(2) In relation to the fuel subsidy, it should be noted that this is paid in addition to the family income supplement while the person is eligible for this.
(3) The medical card is shown here as being withdrawn as the income increases by £20 per week. However, if the person had previously been long-term unemployed, the medical card can be retained for three years, irrespective of earnings.
In addition to the improvements in income tax and PRSI provided in my 1997 budget, families in low paid employment will benefit from this Government's commitment in Partnership 2000 to improve the family income supplement by adjusting the method of calculation from a gross income to a net income basis. As a first step towards fulfiling this commitment, from June this year, family income supplement will be calculated on a basis net of PRSI and the health and employment levies. The current income thresholds are also being increased. These changes will alleviate the extent of the poverty trap for the categories concerned.