Ivor Callely
Question:189 Mr. Callely asked the Minister for Finance the significant personal tax reductions which have been introduced over the past five years; and if he will make a statement on the matter. [5505/02]
Written Answers. - Tax Code.
I assume that the Deputy is referring to the reductions in personal taxation effected since the Government came to office in 1997.
The level of personal taxation may be influenced by movement in any or all of the following: income tax rates; income tax bands; and income tax credits. As a result of changes introduced in the last five budgets, both the standard and top rates of tax have been reduced by six percentage points each from 26% to 20% and from 48% to 42%, respectively.
The standard rate band, which affects the point at which a person will begin to pay tax at the higher rate on his or her income, has also been widened considerably since 1997. Before the Government came into office, the single person's standard rate band stood at £9,900, €12,570. Having regard to this and to the basic personal allowances as they were then, a single person with an income above €17,268 , £13,600, became liable at the top rate of tax. After Budget 2002, the band for a single person stands at €28,000 which is higher than the average industrial wage. Above this point, the person becomes liable to the top rate of tax.
The main personal credits – formerly allowances before the move to tax credits – that is, the basic personal credit and the employee PAYE credit have also been increased and now stand at €1,520, £1,197, and €660, £520, respectively. The result is that no income tax is paid on income of less than €209, £165, per week – equivalent to 90% of the current minimum wage of €233, £183, per week. By comparison, in 1997 a single person entered the tax net at just under £77, €98, per week.
In addition to the above positive changes in personal taxation, there have also been reductions in the burden imposed on individuals by PRSI and levies. Overall, the significant reductions in the burden of personal taxation can be gauged from the fact that the average tax rate – that is, the effect of income tax, PRSI and levies combined – faced by a single person on the average industrial wage has fallen from 27.6% in 1997 to 16.8% today.