Vol. 562 No. 1
117 Mr. Gilmore asked the Minister for Finance his estimate of the percentage of taxpayers who are expected to be paying tax at the higher rate by the end of 2003; the way in which this compares with the budget estimate; and if he will make a statement on the matter. [5359/03]
The position is that prior to the changes to income tax announced in budget 2003, it was estimated that some 29.96% of income earners would be liable to the higher rate of income tax at the end of 2003.
After the budget 2003 changes, it is now estimated that some 29.77% of income earners will be liable to the higher rate of tax by the end of 2003. This small reduction arises from the budget increase in the age exemption limits.
The budget estimate is based on historical Revenue data for the tax year 1999-2000 adjusted to take account of assumed growth in incomes and in the number of income earners to end 2003. The data refers to tax cases rather than individuals and includes both employees and the self-employed and those on other income, for example, pensioners. The data is subject to revision over time and the next revision to take account of actual data for the 2000-01 tax year is likely to be available during the second half of 2003.
Does the Minister agree that the reason so many people are still paying tax at the top rate, despite this Government's promises in the run-up to the election, is due to the failure of this Minister to index tax credits and the tax system for inflation in the budget and the Finance Bill 2003? Does he agree that the Government has repeatedly made commitments to the social partners and others to ensure that 80% of taxpayers pay tax at the standard rate, including a commitment in An Agreed Programme for Government and in the social partnership agreement? Does he agree that these commitments are meaningless until such time as he decides to index tax allowances and credits in relation to the standard rate tax band?
I contrast the deal the ordinary taxpayer has received from this Minister in regard to paying tax to the favoured treatment members of the wealthy elite receive. Is the Minister aware that through the use of special tax avoidance mechanisms, many wealthy people, as statistics from the Revenue Commissioners show, pay little or no tax and that an extraordinarily low number of people declare incomes of over €100,000?
We had a similar debate on Committee Stage of the Finance Bill 2003. As the Deputy is aware, the changes we have made to the taxation system since we came into office in June 1997 have been immense and much appreciated by the ordinary taxpayer. The success of our tax programme has been such that recent OECD reports, which I am sure the Deputy has read and which have been commented on in the newspapers, show that Ireland has the lowest tax wedge of any OECD country. That has been the case for some time. One holds on to more of one's income—
Does that apply to one or two income families?
To all taxpayers. After deductions for tax and social insurance contributions, we have by far the most effective system. That has occurred since we came into power in June 1997. As a result of that and on a post-budget basis, approximately 680,000 people are outside the tax net. On a previous occasion, I gave the amount per week on which a single person paid tax when I became Minister for Finance and the amount per week at which single people now come into the tax bracket.
Deputy Burton referred to the goal of 80% in regard to the standard rate. That was in the 1997 Fianna Fáil election manifesto, was carried over into the programme for Government and was worked into the Programme for Prosperity and Fairness when it was negotiated. It was not something which came out of the other social partnership process.
In regard to the wealthy, I have closed off more tax avoidance measures in my six budgets than any other Minister for Finance in the history of this State.
I wish to ask the Minister about his ambitions for the tax system going forward. Is it his aim that this Government will reduce the proportion of people paying tax at the top rate to 20%? Is that still the Government's ambition? Does he believe there will be further opportunities to reduce the rates of income tax, as has been the hallmark of his policy in recent years, or does he believe the recent collapse in income tax revenue signals the end of that strategy as a way forward and that we are now looking towards a different approach to income tax?
There is a completely different economic scenario now and this will continue for the next number of years. That being the case, the scope for massive tax reductions will not be the same as it was in the past five years. Following on from that, I do not envisage a situation in the immediate future where tax rates will reduce any further. However, it depends very much on economic conditions going forward. It is still the Government's goal that only 20% of people will pay at the top rate of tax but the main thrust of Government policy will be to endeavour to exempt those on the minimum wage and to remove them from the tax system altogether. The latter is the number one priority and other goals in the taxation area must come second to that.
It is only fair to point out to the Deputy and the House, as I did in the run-up to the last budget, that the era of massive tax reductions is at an end. We should try to consolidate our position and keep our unemployment rate and tax rates at present levels. Unquestionably, the Government's proactive tax policy over the past number of years has contributed to our economic success.
