Caoimhghín Ó Caoláin
Question:142 Caoimhghín Ó Caoláin asked the Minister for Finance if his Department has carried out a study of the implications for the taxation and PRSI systems of the Sustaining Progress agreement. [21139/03]
Ceisteanna – Questions (Resumed). Priority Questions. - Sustaining Progress.
The Sustaining Progress commitments on taxation indicate that the need to pursue responsible fiscal policies and to maintain the public finances in a healthy condition will guide all taxation decisions as will a range of other points. These are issues I will bear in mind in annual budgets over the period of the agreement. The Deputy may be referring to the personal taxation objectives in the agreement which state that to the extent that there is any scope for personal tax reductions, progress will continue to be made over the three budgets contained within the lifetime of the agreement towards exempting the minimum wage from taxation and moving towards a target where 80% of all earners pay tax at not more than the standard rate. The cost implications of making further progress in either commitment depends on the degree of progress possible in the annual budgetary context. The primary functional responsibility for the social insurance system, including the revenue aspect of the system, rests with the Minister for Social and Family Affairs.
I always get concerned when Ministers tell us commitments depend on something. The Minister will be aware the Sustaining Progress agreement has an objective that the tax system should be "fair and able to adapt to changing circumstances". Does the Minister agree there is broad agreement that the taxation policies of the past six years have benefited far and away the better off in society and have disproportionately addressed the needs of the less well off? Does he accept many of the lowest paid workers are still in the tax net, despite years of promises to take them out? Sustaining Progress acknowledged that almost one in three of all PAYE workers pay tax at the highest rate of income tax, even though the Minister's target was one in five. Does he also acknowledge a considerable swathe of workers who are on the minimum wage or below are also in the tax net? How will changes envisaged in Sustaining Progress affect this? Does the Minister accept real inequality was uncovered in the Revenue Commissioners' survey of the highest earners in society conducted last December? It found that one quarter of the highest earners pay no tax at all. How is that fair? What does the Minister propose to do about that?
I do not know where the Deputy has been for the past six years, but if he had studied the taxation figures, he would have noted that they have been commented favourably upon by bodies such as the OECD, the EU—
My question is about Sustaining Progress, not the past 26 years.
The last six years.
We did not come to the House for a history lesson.
An Leas-Cheann Comhairle
Please allow the Minister to reply.
All I want the Minister to deal with is Sustaining Progress and contemporary matters.
The Deputy asserted that over the past six years the well off had done better out of the budgets introduced by the previous Administration than anybody else. According to the bodies to which I referred, Ireland has the lowest tax wedge of all countries in the EU and the OECD and it has a lesser take from lower wage earners than any other country by a considerable margin. That has been achieved through the budgets I have introduced since 1997. We have the best tax system for the low paid in the EU and the OECD and it has received favourable comment. The implementation of the last budget meant that 90% of minimum wage earners were taken out of the tax net. The Deputy's assertions were true prior to 1997. However, they are no longer correct and the facts, internationally commented upon, bear that out. The commitments in Sustaining Progress, like all other commitments, are conditional on the budgetary position. As I have said in Sustaining Progress, and previously in the Fianna Fáil election manifesto, any improvements in taxation over the coming years will be concentrated on those at the lower end of the scale. That is where our commitment lies.
I welcome the Minister's response. He acknowledges that the total receipts from tax and social insurance contributions are the lowest in the EU when measured in terms of either GDP or GNP. While that seems to satisfy the Minister greatly, how does he balance that with the reality that we have the lowest social provision and much lower infrastructural quality in terms of ordinary people's daily lives? What is the price of the Minister's boast? That price affects the daily life conditions of families which are struggling. I will not recite the whole litany of neglect by the Minister and his colleagues in Government over this past 12 months or over the previous five years. The price exacted is an unacceptable quality of life for ordinary people in this jurisdiction, and the Minister's boast is not one he should proudly proclaim in this House.
The facts do not bear out the Deputy's assertions. The facts bear out that the taxation changes made over the previous six years have given Ireland the best tax system for the lower paid in the EU and in the OECD. We have been able to do that and at the same time increase provision for all elements in the social scale. We gave record increases in areas such as old age pensions. We have more than doubled the amount of money being spent on the health service, giving us a level of spend on the health service—
To no effect.
What service is the Minister talking about?
The amount of money we are spending on the health service is over and above the EU average in terms of gross national product.
An Leas-Cheann Comhairle
The time for this question has expired.
We have achieved that while, at the same time, having a tax system which all outside commentators say has been one of the hallmarks of, and contributory factors to, Ireland's economic success.