Bernard J. Durkan
Question:281 Mr. Durkan asked the Minister for Finance the measures or tax incentives, if any, he has to enhance the attraction of employment among the lower paid; and if he will make a statement on the matter. [23883/98]
Written Answers - Tax Incentives.
In my first budget last year, I introduced a tax initiative to help the long-term unemployed which is now titled job assist. This is a two part initiative which provides an incentive for a long-term unemployed person to take up employment, and also provides an incentive for employers to employ a long-term unemployed person. The first part of the initiative provides a special tax deduction in the first year of employment of £3,000 plus £1,000 for each child for persons unemployed for one year or more who take up a job. The allowance is tapered over a three year period. An employee availing of the scheme also retains his or her medical card entitlement for three years and other secondary benefits are retained also for three years where income earned is less than £250 a week. To be eligible under the scheme a long-term unemployed individual must have been unemployed for at least 12 months and in receipt of either an unemployment payment, unemployment benefit or unemployment assistance, or the one-parent family allowance from the Department of Social, Community and Family Affairs. In certain circumstances, time spent on certain activities, programmes or courses for the unemployed can be taken into account for calculating the 12 months mentioned above. Up to the beginning of October 1998, 767 persons had availed of this new scheme.
The income tax and PRSI system is structured to ensure employment will be attractive to the lower paid. The annual single person's tax free allowance and PAYE allowance combined amount to £3,950, which means that an employee can earn £76 per week before tax is payable.
Where exemption limits apply, a single person can earn £78.85 per week before tax is payable. The threshold for payment of the health and employment and training levies means that employees earning £207 per week or less will not have to pay the health and employment and training levies. The first £100 of weekly earnings is free of employee PRSI. The reduction in the standard rate of tax — from 26 per cent to 24 per cent in my first budget last year — has also enhanced the incentive to take up low paid employment.
These measures are in addition to benefits and schemes operated by other Departments. Of these, the family income supplement, FIS, operated by the Department of Social, Community and Family Affairs is of particular benefit for single earner households with children, where the earner is in low paid employment. Following a change announced in budget 1998, FIS is now calculated on the basis of net income, that is net of income tax and PRSI, which will further improve the attractiveness of employment for the relevant target group.
The Government's policy programme, An Action Programme for the Millennium, recognises the need to reduce the burden of personal taxation in order to reward effort and give people an incentive to take up work. I have already signalled the need to focus tax changes on benefiting the lower and middle income groups. The taxation measures which I will bring forward in next month's budget will make further improvements in this regard.