The policy development of widening the standard rate tax band has been debated at length in the House and elsewhere since budget 2000. The Deputy will be aware that part of the context for the policy changes with respect to band widening that I introduced in budget 2000 was the Government's target that at least 80% of taxpayers should not be subject to the higher rate of tax. In my statement on budget 2000, I pointed out that one of the chief problems with the taxation system was the low level of income at which single people became liable to the top rate of tax and that single people who were on incomes less than the average industrial wage were paying tax at the top rate.
The aim of the initiative, on completion, was to reduce the percentage of taxpayers on the top rate of income tax to 17%, or 12% if exempt cases are included. The Deputy will also be aware that the policy of establishing a single standard rate band for all individual taxpayers was supported by the social partners in the Programme for Prosperity and Fairness. The social partners also support the target that at least 80% of taxpayers should not be subject to the higher rate of tax.
I understand that the NESF report to which the question refers deals with the alleviation of labour market shortages, it does not concern taxation matters as such. However, the report, in its references to taxation, indicates "support in principle for moving to more individual taxation". It also acknowledges that widening of the tax bands is in itself progressive. To complement band widening, as part of an overall tax reform package, the report suggests that measures be adopted for those on lower incomes and-or all taxpayers equally.
The data, as quoted in the Deputy's question, on the distributional impact of the band widening does not coincide with what, I understand, is contained in the NESF report on the alleviation of labour markets shortages. It is noteworthy that the data in the NESF report was produced using the ESRI's SWITCH system. The output of that system depends on the parameters and assumptions that are input into it. I am not aware of the parameters or assumptions used by NESF to generate the output. The Deputy will understand that it would not be appropriate for me to outline at this stage the measures that are to be included in my Budget Statement on 6 December next.
