Written Answers. - Tax Reliefs.
Michael McDowell
Question:
12
Mr. M. McDowell
asked the
Minister for Finance
the gross full year cost for each year and the estimated net full year cost for each separate year of implementing the reductions of income tax and the widening of tax bands in the manner set out in a schedule (details supplied); the amount by which the cost for each year would be exceeded by the commitment of tax reductions given in the Partnership 2000 programme; and if he will make a statement on the matter.
[11676/97]
I am informed by the Revenue Commissioners that the only relevant information available as to cost is in relation to the direct gross cost to the Exchequer if the tax changes referred to in the question were enacted for the income tax years 1997-98 to 2001-02 inclusive.
Assuming the enactment of the changes announced in this year's budget, the additional full year costs to the Exchequer of introducing the changes referred to in the question are estimated as follows:
|
Year
|
Estimated additional full year cost
|
|
£m
|
|
1997-1998
|
321
|
|
1998-1999
|
387
|
|
1999-2000
|
417
|
|
2000-2001
|
144
|
|
2001-2002
|
57
|
The figures of cost provided for each year after 1997-98 represent the cost of each new increment of the proposed changes over and above the cost of the preceding year's phase. These figures are, of course, provisional and subject to revision.
As the Deputy will be aware Partnership 2000 states that "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 this year's budget where the personal tax reductions introduced, including income tax levies and employees' PRSI, amounted to £393 million on a full year basis. Assuming the enactment of the changes announced in this year's budget, the further changes proposed by the Deputy for the three year's of Partnership 2000, that is up to 1999-2000, would cost an additional £1,125 million on a full year basis. This would give a total of £1,518 million in personal tax and PRSI reductions over the period, compared with the £900 million committed in Partnership 2000.
The significant improvements made over the last three budgets have been achieved through measures aimed towards reducing the average tax take rather than cutting tax rates. These measures included increasing personal allowances and exemption limits, widening the standard band, introducing the £80 per week PRSI-free allowance and the 1 per cent reduction in both the standard income tax rate and the main rate of employees' PRSI which were introduced in this year's budget.
Continued progress is, of course, needed towards reducing the tax and PRSI burden, thereby improving the competitiveness of the economy. There are, however, different views as to the form further reductions in taxation should take, and the groups towards whom relief should be targeted. Significant reductions, especially in the top rate of income tax will focus the benefit primarily towards people with higher incomes. A more balanced tax package, than that proposed by the Deputy, which focuses assistance towards those on lower to middle incomes is what is required.
