Cecilia Keaveney
Question:86 Cecilia Keaveney asked the Minister for Finance the improvements in personal taxation which have occurred in each of the years from 1996 to 2002; and if he will make a statement on the matter. [6173/02]
Written Answers. - Tax Allowances.
The level of personal taxation has been influenced by changes in income tax rates, the standard rate band and tax credits/allowances. A table showing the rates, bands and credits as they were in each year from 1996 to 2002 is attached.
As a result of changes introduced in the six budgets, the last five of which occurred since this Government came into office, the standard rate of tax has been reduced by seven percentage points from 27% to 20% and the top rate of tax has been reduced by six percentage points from 48% to 42%.
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 1996. In 1996, the single person's standard rate band stood at £9,400, €11,936. Having regard to this and to the basic personal allowances as they were then, a single person with an income above €16,316, £12,850, 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 changes in budget 2002 mean that, as a result of the last five budgets, over 370,000 income earners have been removed from the top rate of tax. There are now 26.7% of income earners paying at the higher rate compared with, for example, over 32% paying at the top rate in 1999-2000.
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 1996 a single person entered the tax net at just under £75, €95, per week. Over the past five budgets, over 383,000 income earners have been taken out of the tax net, including 71,500 elderly people, bringing the total outside the net to 692,600 – representing 37% of all income earners. 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 income tax, PRSI and levies combined as a percentage of gross income – faced by a single person on the average industrial wage has fallen from 29.7% in 1996 to 16.8% today.
Income tax rates, bands and allowances/credits 1996 to 2002
|
Year |
1996/97IR£ |
1997/98IR£ |
1998/99IR£ |
1999/2000IR£** |
2000/01IR£ |
Short tax “year” 2001IR£ (12 month values shown below)** |
2002IR£ |
2002Euro |
|
Personal Allowances/credits |
||||||||
|
Single |
2,650 mr |
2,900 mr |
3,150 mr |
4,200 st |
4,700 st |
1,100 tc |
1,197 tc |
1,520 tc |
|
Married |
5,300 mr |
5,800 mr |
6,300 mr |
8,400 st |
9,400 st |
2,200 tc |
2,394 tc |
3,040 tc |
|
PAYE (Employee tax credit) |
800 mr |
800 mr |
800 mr |
1,000 st |
1,000 st |
400 tc |
520 tc |
660 tc |
|
Rates |
||||||||
|
Standard rate |
27% |
26% |
24% |
24% |
22% |
20% |
20% |
20% |
|
Higher rate |
48% |
48% |
46% |
46% |
44% |
42% |
42% |
42% |
|
Bands |
||||||||
|
Single |
9,400 |
9,900 |
10,000 |
14,000 |
17,000 |
20,000 |
22,052 |
28,000 |
|
Married |
18,800 |
19,800 |
20,000 |
28,000 |
||||
|
Married one earner couple |
28,000 |
29,000 |
29,140 |
37,000 |
||||
|
Married two earner couple |
34,000 |
40,000 |
44,104 |
56,000 |
Note 1
mr = marginal rated allowance
st = standard rated allowance
tc = tax credit
** The move from the system of tax allowances to one of tax credits began in the tax year 1999/2000, and was completed in the short tax "year" 2001.
Note 2
From the tax year 2000/2001, in the case of a two-earner married couple, a spouse may transfer a portion of his/her standard rate band to the other spouse for a tax year up to the limit of the difference between the married one-earner band and the single standard band (in the current year this figure is €9,000 i.e. €37,000 less €28,000). The remaining non-transferable portion of the person's standard rate band can only be used in so far as the person has income to absorb it.