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Dáil Éireann debate -
Tuesday, 10 Dec 2002

Vol. 559 No. 1

Written Answers. - Tax Code.

Jan O'Sullivan


127 Ms O'Sullivan asked the Minister for Finance the progress made to date in meeting the commitment given in An Agreed Programme for Government to remove all those on the national minimum wage from the tax net; the number of persons who earn the national minimum wage or less who are currently paying income tax; and if he will make a statement on the matter. [25564/02]

The Government programme identifies achieving a position where all those on the minimum wage are removed from the tax net as a priority over the next five years. The commitment is given in the context of a broader economic and budgetary strategy which provides, among other things, that the public finances will be kept in a healthy condition and that personal and business taxes will be kept down in order to strengthen and maintain the competitive position of the Irish economy.

The Deputy will be aware also of the commitment contained in the Programme for Prosperity and Fairness which states: "It is an agreed policy objective that, over time, all those earning the minimum wage will be removed from the tax net".

The position is that the statutory minimum wage is an average hourly rate of gross pay for an employee as defined under the National Minimum Wage Act, 2000. The wage currently stands at €6.35 per hour having been increased from the previous amount of €5.97 per hour which applied up to 30 September 2002. The annualised equivalent of the present minimum wage is €12,878.

The question of when all those earning up to an annual amount equivalent to the statutory minimum wage annualised will be not be liable for income tax is a matter for consideration by the Government over the next number of years consistent with the Governments overall economic and budgetary strategy and with the Governments commitments as already outlined. However, I can tell the Deputy that when the statutory minimum wage came into effect in 2000, less than 64% of the annualised figure of €11,330 – £8,923 – was exempt from taxation. In budget 2002, 90% of the minimum wage became exempt from tax and in budget 2003 this position has been maintained even though the minimum wage was increased in October 2002.

I understand from the Revenue Commissioners that it is estimated that in 2003 there will be 52,000 tax cases who have income at or below the minimum wage and who are liable for income tax. It should be noted that this figure relates to those whose annual income is less than the minimum wage annualised and would include those who are working less than full-time on an hourly rate that is greater than the minimum wage. It should be noted that the figure differs from the earlier estimated figure of 72,000 supplied in my answer to a previous Dáil question on 12 November 2002 due to two factors – the increase in the threshold at or below which no tax is payable in budget 2003, and the fact that the estimate is on a post-budget 2003 basis as compared to the previous estimate which was prepared on a post-budget 2002 basis.