Vol. 571 No. 4
243 Mr. P. McGrath asked the Minister for Finance the net cost of abolishing the existing personal and PAYE tax credits and the abolition of the 42% higher rate on income tax; and if he will make a statement on the matter. [22090/03]
The Revenue Commissioners inform me that the full year net cost to the Exchequer, estimated by reference to projected 2004 incomes, of the change mentioned by the Deputy is estimated at roughly €60 million. The personal tax credits mentioned in the question are assumed to be the basic tax credits available to single, widowed and married persons as well as the additional tax credit for lone parents. This estimate is provisional and is subject to revision.
I would like to point out to the Deputy that a move along the lines implicit in his question would mean that, among other things, over 290,000 income earners who are exempt from income tax at present would be obliged to pay tax at the standard rate and, would reverse to a large extent the progress made by the Government over the last six budgets with regard to removing those on low pay from the tax net and tackling disincentives to work. In addition, the revised regime, if implemented, would mean that the progressivity of the income tax system, that is the extent to which the tax burden increases more than proportionally with income, would be largely removed.
244 Mr. Durkan asked the Minister for Finance the steps he has taken or intends to take to sharpen Ireland's competitiveness edge in the international arena; and if he will make a statement on the matter. [22152/03]
I am continuing to pursue macro-economic policies designed to sustain non-inflationary economic growth, high levels of employment and the maintenance of conditions in which investment and enterprise can flourish thereby supporting international competitiveness. Under Sustaining Progress my Department has also been participating with other Departments and representatives of employers and unions in progressing the anti-inflation initiative. Bringing inflation down is essential to safeguarding our international competitiveness.
245 Mr. Durkan asked the Minister for Finance the rating of Ireland in terms of competitiveness in the international league at present; the extent to which Ireland's position is determined by the fiscal policies practised by his Department; if the economy is improving in terms of competitiveness or otherwise; and if he will make a statement on the matter. [22153/03]
There are several publications which provide detailed information on Ireland's competitive position, including the publications of the National Competitiveness Council which reports to the Taoiseach. Many factors impact on competitiveness broadly defined. These include fiscal policy, income developments, competition and regulatory frameworks, infrastructure and labour market policies.
As a small open economy which is highly integrated into the global economy through our strong trade and investment links, economic conditions in Ireland are largely determined by our ability to supply goods and services to our major trading partners. In this context, exposure to the recent appreciation of the euro against the dollar and sterling has been much greater in Ireland than in other euro zone countries given the pattern of trade. The exposure has been greater in some parts of the traded sector than others. While wage growth is projected to decelerate this year, the rate of increase is likely to exceed that pertaining in most of our trading partners. The deterioration in our cost base, together with the appreciation of the euro, is continuing to have a detrimental impact on national competitiveness. Exporting sectors face difficulty, particularly the more labour intensive sectors such as traditional manufacturing which are very exposed to developments in the euro-sterling bilateral exchange rate.
The economy has the capacity to grow at up to 5% per annum over the medium term. Achieving growth rates of this magnitude, however, is conditional upon, inter alia, improvements in competitiveness. It is vital that wages and costs evolve in line with the terms of Sustaining Progress. It is also important that wages developments closely reflect productivity growth, in the private and public sectors.
246 Mr. Durkan asked the Minister for Finance the extent to which the steps taken by him or his Department have affected the competitiveness of the economy in the past five years; and if he will make a statement on the matter. [22154/03]
As the Deputy will be aware, the recent IMF report commended the Irish authorities "for their exemplary track record of sound economic policies, which have resulted in a dynamic, open and robust economy "with growth notably above the EU average over the past decade" and resilience to external shocks".
My Department has been implementing policies designed to sustain non-inflationary economic growth and high levels of employment and to maintain the conditions in which investment and enterprise can flourish, thereby supporting international competitiveness. Under Sustaining Progress my Department has also been participating with other Departments and representatives of employers and unions in advancing the anti-inflation initiative. Bringing inflation down is essential to safeguarding our international competitiveness.
