National Minimum Wage.

Dáil Éireann Debate, Tuesday - 23 November 2004

Tuesday, 23 November 2004

Questions (54, 55)

Gay Mitchell

Question:

98 Mr. G. Mitchell asked the Minister for Finance the cost of removing the minimum wage entirely from the scope of income taxes in 2005. [29897/04]

Eamon Gilmore

Question:

118 Mr. Gilmore asked the Minister for Finance the progress made to date with regard to the commitment given in An Agreed Programme for Government to remove all persons on the national minimum wage from the tax net; the steps he intends to take to ensure that this commitment is honoured; and if he will make a statement on the matter. [29847/04]

Written answers

Minister for Finance (Mr. Cowen)

I propose to take Questions Nos. 98 and 118 together.

I am informed by the Revenue Commissioners that the full year cost of removing the minimum wage entirely from the scope of income tax in 2005 would be €350 million, if achieved through an increase in the employee PAYE credit. It would be €525 million in a full year if the necessary increase was applied solely to the personal credit. If the required increase was applied equally between the personal and employee credits, the full year cost would be €440 million.

When the statutory minimum wage came into effect in 2000, less than 64% of the annualised figure of €11,330, or £8,923, was exempt from taxation. In budget 2002, 90% of the minimum wage became exempt from tax and in budgets 2003 and 2004, this position has been maintained even though the minimum wage was increased in October 2002 and February 2004. The wage currently stands at €7 per hour, having been increased from €6.35 per hour on 1 February 2004. The annualised equivalent of the minimum wage is €14,196 and 90% of this figure is free of tax for the single PAYE person.

There is a commitment in the Government programme, An Agreed Programme for Government, which states that "over the next five years our priorities will be to achieve a position where all those on the minimum wage are removed from the tax net". The five year period mentioned commenced two years ago when the Government was elected to office. I should also point out that the commitment to exempt the minimum wage from tax 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 current national partnership agreement, Sustaining Progress, contains a commitment in generally similar terms. Accordingly, exemption from tax of those on the minimum wage will be a matter for consideration in the context of the annual budgets over the next number of years consistent with the Government's overall economic and budgetary strategy and with the Government's commitments already mentioned. However, there should be no doubt about our commitment in this regard.