Dáil Éireann debate -
Thursday, 1 May 1997

Vol. 478 No. 6

Written Answers. - Tax Reductions.

Ivor Callely

Question:

34 Mr. Callely asked the Minister for Finance his views on what constitutes substantial tax reductions as referred to in A Government of Renewal's first paragraph of section 49; and if his attention has been drawn to the fact that the tax-payer is totally disappointed with the lack of progress on tax reductions over the past two years. [11712/97]

Minister for Finance (Mr. Quinn)

Significant personal tax reductions have been made over the last three budgets. The cumulative full year cost of the personal tax reductions introduced, including income tax, levies and employees' PRSI, in the three budgets amounts to close to £750 million even after allowing for the phased standardrating of reliefs for mortgage interest and medical insurance premiums which was introduced in the 1994 budget.

The last three budgets combined have seen the basic personal allowances increased by £550 single/£1,100 married, or by almost 23.5 per cent; the general exemption limits increased by £400 single/£800 married and those for the aged increased by £500 single/£1,000 married, or by around 11 per cent; the standard tax band widened by £1,700 single/£3,400 married, or by over 20 per cent and the income level at which the top rate of tax is payable rise by around 17 per cent in the case of a single PAYE worker and by 19 per cent in the case of a married couple, one earner, over this period.

These increases compare very favourably with the estimated CPI increase of around 6.5 per cent over the same period.

Furthermore, in this year's budget both the standard income tax rate and the main rate of employees' PRSI were reduced by 1 per cent. A new PRSI-free allowance was introduced in 1995 and increased to £80 per week for most employees in the 1996 budget. In addition, the income tax age allowance to those aged 65 and over was doubled to £400 single/£800 married in this year's budget.

Perhaps the best indicator of the progress made is to look at reductions in the average tax burden. For example, in 1994-95 the average tax burden, including employees' PRSI and levies, for a single employee, earning the average industrial wage, was 31.3 per cent. In the tax year 1997-98, after allowing for wage increases, the tax burden is expected to fall to just below 27.2 per cent. For a married couple on the same level of income, the tax burden is expected to fall from 23.4 per cent in 1994-95 to just below 20.1 per cent in 1997-98. This represents a significant real reduction in workers' tax and PRSI burden.