Billy Timmins
Question:89 Mr. Timmins asked the Minister for Finance if he is satisfied with the entry level to the top rate of income tax; and if he will make a statement on the matter. [2572/05]
View answerTuesday, 1 February 2005
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As a result of the budget, the standard rate bands for this and subsequent years are €29,400 for a single person, €38,400 for a married one earner couple and €58,800 for a married two earner couple, of which €38,400 is transferable. Lone and widowed persons have a standard rate band of €33,400. Income above these levels is subject to the higher rate of tax of 42%.
The major portion of available resources for the personal tax package in budget 2005 was devoted to achieving the aim of taking the minimum wage out of the tax net. This fulfilled a key taxation commitment contained in An Agreed Programme for Government. It will benefit those on low incomes and will help remove 66,000 from the tax net for 2005. Overall, after budget 2005, there are more than 34% of income earners, 656,500, outside the tax net. This compares, for example with about 35% of income earners, 380,400, in 1997.
To the extent that further resources were available for tax reductions in the budget 2005 income tax package, they were used essentially to widen the standard rate bands so as to increase the entry level to the higher rate of tax. The increases in the standard rate band will ensure that an extra 52,000 taxpayers will not pay tax at the higher rate in 2005. The band widening in budget 2005 ensures that about 33% of income earners will pay tax at the higher rate in 2005 as compared with a projected 36% of income earners if no such measure had been included in the budget.
It should be noted that all income earners benefited from the tax changes in the recent budget and that while the proportion on the top rate increased, there was a reduction in their average tax rate, that is, tax as a percentage of income. It should also be noted that in 2005 a single PAYE worker on the average industrial wage will pay more than €200 less in tax in 2005 than in 1997 on a wage which is more than €11,000 greater in value.