Written Answers. - Tax Code.
John Perry
Question:
143
Mr. Perry
asked the
Minister for Finance
his views on the submission from a group (details supplied) in County Waterford to provide in the Finance Bill, 2001, that all married couples whether one or two incomes, where either spouse is 65 years of age, or who because of ill health of either spouse have had to retire early be granted the doubling of standard rate tax bands with complete transferability between the spouses; and if he will make a statement on the matter.
[3932/01]
John Perry
Question:
144
Mr. Perry
asked the
Minister for Finance
if his attention has been drawn to the fact that the vast majority of members of an organisation (details supplied) are retired on single income; if his attention has further been drawn to the fact that they are now adversely affected by the restriction of the doubling of the standard tax band on two income families and as a result of this from April 2001, the increase in tax payable by affected people can be up to £2,420; and if he will make a statement on the matter.
[3933/01]
John Perry
Question:
145
Mr. Perry
asked the
Minister for Finance
his views on whether one of the chief reasons given under plans mentioned in his budget speech, that it was to encourage married women back into the work force; if his attention has been drawn to the fact that members of an organisation (details supplied) and their spouses have no chance of re-entering the work force; if he will include retired people in his plans in this regard; and if he will make a statement on the matter.
[3934/01]
I propose to take Questions Nos. 143, 144 and 145 together.
The position is that those aged 65 and over are treated more favourably under the Irish income tax code than the generality of taxpayers. Since coming into office, the exemption limits for the elderly have been increased by up to 85%. For those aged 65 and over, the exemption limits now stand at £8,500 single/£17,000 married. The tax exemption limit for married couples aged 65 or over at £17,000 (£327 per week) compares favourably with the general exemption limit of £8,200 for couples under 65.
Where pensioners aged 65 and over are taxed under the normal personal allowance/tax credit system, they are eligible for the special age allowance in addition to the normal personal allowances. For couples aged over 65 the age allowance is currently £1,600 at the standard rate.
Pensioners will benefit from the general increases in the tax allowances-credits announced in budget 2001, i.e. the doubling of the PAYE allowance to £2,000 and the £1,600 increase in the married personal allowance to £11,000. The net effect of the improvements is that couples over 65 with one pension, who are within the normal tax allowance system, do not pay any tax on income up to £280 per week. It should be noted that the standard rate band for married one earners was increased in this budget to £29,000. Pensioners will also benefit from the substantial cuts in tax rates since this Government came into office. Prior to my 1998 budget the standard rate stood at 26% and the top rate at 48%. As of 6 April 2001, both these rates will have been cut by six percentage points, to 20% and 42% respectively.
The Deputy will appreciate that the policy of widening of the standard rate band and putting it on a per person basis, which commenced in budget 2000, is designed primarily to meet the objective set out in the Government's An Action Programme for the Millennium that 80% of taxpayers should not pay tax at the higher rate. Given the move to the tax credit system this objective could only be realised by widening the standard rate band. The best way of achieving this objective was by restructuring the band so that persons are taxed on what they earn as individuals regardless of whether they are single or married. This policy will also make re-entering the work force more attractive for a non-earning spouse. As a result of the changes made in the band structure, the proportion of income earners on the higher rate will fall this year to 23% while the corresponding figure for taxpayers aged 65 and over is of the order of 16%. The widening of the standard rate band is one of the main elements of the substantial programme for tax reductions and reform which the Government has undertaken and does not lead to any taxpayer paying more tax.
The Deputy will be aware that the Programme for Prosperity and Fairness generally supports the Government's programme of tax reform. I would draw the Deputy's attention in particular to section 1.1.4 relating to band widening which provides as follows:
The social partners support the policy of establishing a single standard rate income tax band for all individual taxpayers. They also agree that the standard rate income tax band should be kept under review in the light of increases in income levels and the objective of ensuring that, over time, at least 80% of taxpayers are not subject to the higher rate of income tax.
It is the Government's intention to proceed with the policy of establishing a single standard rate band for all individual taxpayers to secure the objectives which I have outlined.
The Programme for Prosperity and Fairness also states that the Government will continue to review the income tax allowances and exemption limits for those over 65 years with a view to further assisting the position of the aged. The tax position of older people will be borne in mind in the context of budgetary planning.
