Dáil Éireann díospóireacht -
Wednesday, 7 Feb 1979

Vol. 311 No. 4

Financial Resolutions, 1979. - Financial Resolution No. 1: Income Tax.

Minister for Finance (Mr. Colley)

I move:

(1) That, in relation to income tax for the year 1979-80 and any subsequent year of assessment—

(a) section 5 (1) of the Finance Act, 1977, shall be amended by the substitution of the Table to this subparagraph for the Table to that subsection:

TABLE

Part of taxable income	Rate of tax	Description of rate
(1)	(2)	(3)
The first £1,100	25 per cent.	the reduced rate
The next £3,000	35 per cent.	the standard rate
The next £1,500	45 per cent.	the higher rates
The next £1,000	50 per cent.
The remainder	60 per cent.

, and

(b) (i) Where a deduction falls to be made from the total income of an individual in respect of relief to which the individual is entitled under a provision mentioned in column (1) of the Table to this clause and the amount of the deduction would, but for this clause, be an amount specified in column (2) of the said Table, the amount of the deduction shall, in lieu of being the amount specified in the said column (2), be the amount specified in column (3) of the said Table opposite the mention of the amount in the said column (2):

TABLE

Statutory provision	Amount to be deducted from total income for 1978-79	Amount to be deducted from total income for 1979-80
(1)	(2)	(3)
	£	£
Income Tax Act, 1967 (No. 6 of 1967):
section 138
(married man)	1,730	2,230
(single person)	865	1,115
(widowed person)	935	1,185
section 141 (child)	240	218

, and

(ii) section 138 of the Income Tax Act, 1967, shall be amended—

(I) in subsection (1), by the substitution of "£2,230" for "£1,730" in each place where it occurs, by the substitution of "£1,115" for "£865", and by the substitution of "£2,345" for "£1,845", and

(II) in subsection (2), by the substitution of "£1,115" for "£865" in each place where it occurs, and by the substitution of "£1,185" for "£935", and

(iii) section 141 of the Income Tax Act, 1967, shall be amended, in subsection (IA), by the substitution of "£218" for "£240", and

(iv) section 10 of the Finance Act, 1976 (No. 16 of 1976), and section 6 of the Finance Act, 1978 (No. 21 of 1978), shall have effect subject to the provisions of this subparagraph, and

(c) subsections (3), (5) and (6) of section 224 of the Income Tax Act, 1967, shall not apply or have effect.

(2) It is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).

Mr. P. Barry

We are opposing this because the increases in the allowances are inadequate and these have been further diluted by the abolition of the 20 per cent band and by the children's allowance being reduced, not having been increased at all last year, and also because of increased taxes on farmers.

Mr. B. Desmond

We are opposing this resolution as well. Could the Minister give us a more elaborate explanation of the rationale behind his reduction of the childrens' allowance from £240 to £218? It seems to be a bit of a dutch auction, to say the least, in the context of the Minister granting some £27 million of income tax relief. He has indulged in a juggling exercise. The more one examines this the more apparent it becomes that there is a great need for an explanation by the Minister as to why he dropped the 20 per cent band and did not leave the child allowance of £240 alone. One could have argued that the Minister should have substantially increased that allowance. The Minister should elaborate further on this decision. The reaction of most people will be that £27 million in the context of £800 million for income tax is peanuts. I find it impossible to understand why the Minister indulged in a kind of bring and buy sale. It is difficult to understand the rationale of Cabinet thinking behind this move. We should have comment from the Minister because there is a great deal of public confusion in relation to this. Public assessment is that the effort at redistribution is very marginal and of very little consequence in terms of any impact on the people's expectations for PAYE relief.

Mr. M.P. Murphy

An allowance of £240 for a child is ridiculous when one considers the steady decline in the value of money over the years. The figure has not been changed in recent budgets. It is surprising that the change in the budget is not upwards instead of downwards. We are all aware that a teenager at school or at college would cost his or her parents in the neighbourhood of £1,000 annually, with the exception of those who receive a State subsidy. The Minister should have increased the allowance in respect of children just as he increased the allowance for married people. An allowance of £218 per annum is completely out of place for any child. This proposal is most disappointing. What is the value of a pound today compared with its value when the allowance was set at £240 per child? In my view its value has declined substantially. I must protest at this reduction. We should have double the figure of £240.

Mr. T.J. Fitzpatrick

(Cavan-Monaghan): Deputy Barry was correct in describing this as an anti-family budget and that is the reason we are voting against this measure. Fianna Fáil are conscious of the effects of this measure. They are trying to cloud their treatment of children in last year's and this year's budgets by reducing the allowance for children under the income tax code. No increase was granted in the children's allowances under the social welfare code last year and the child allowance for income tax purposes was not increased either. This year they have made a big thing out of their decision to give some increases under the social welfare code in respect of children but, for the second year in succession, they have failed to increase the income tax allowance in respect of children. In fact, they have reduced that allowance. It is a long time since the allowance in respect of children was increased under the social welfare or income tax codes.

The cost of caring for children has increased substantially in recent years. For example, the cost of providing proper medical care for children has increased substantially as has the cost of keeping children at school. It is unworthy of a Government who came to power to, according to themselves, administer equity to set the precedent of reducing the allowance under the income tax code in respect of children. I must protest in the strongest possible manner against that move.

Mr. Enright

This reduction in child allowance will prove a sizeable blow to families with three or more children. The Minister will no doubt tell the House of the increase he has given in children's allowances but I should like to tell him that while the increase in respect of the first child amounts to approximately 28 per cent this reduces to approximately 13 per cent for the third and subsequent children. The two changes together will have serious repercussions on families with three or more children. I cannot understand the thinking behind this move. The increase in the allowance for married people of £500 is infinitesimal for families with four or five children. There is no logical explanation for this decrease in the allowance. The Minister should have given a sizeable increase. This move is being introduced at a time when families are under considerable pressure because of increases in food prices and the withdrawal of subsidies.

Mr. Horgan

Briefly at this stage I would like to draw the attention of the House to the section of the Minister's statement in relation to personal income tax, the allowances, the rates and the bands. The Deputy Leader of the Labour Party, Deputy O'Leary, has already referred with some force to the inadequacy of many of the measures contained in this budget but there are aspects of this section which need to be emphasised. I am sorry not to have had, but perhaps we will get it later, a more detailed costing by the Minister of the separate items in the various concessions he has announced, because until we get this information it is a little difficult to estimate with any degree of accuracy whether any real transfer of resources has taken place.

An Leas-Cheann Comhairle

On financial resolutions all Deputies do is ask brief questions; we do not make speeches. Deputies may make brief statements dealing with what exactly is in these Financial Resolutions.

Mr. Horgan

I want to ask the Minister what the cost of removing the 20 per cent band is. It is my belief that the estimated 40,000 people who will be removed from the income tax net completely as a result of the removal of this lower band have in many cases been paying very little tax—on his own figures a maximum of about £100 each a year—and the cost of this concession to the Government, compared to what will be taken from these people by way of food subsidies and similar factors, will show very clearly that the supposedly generous act of taking 40,000 people out of the income tax net is purely surface dressing on a budget that does nothing substantial to redistribute income in the way the Government have claimed to be doing.

An Leas-Cheann Comhairle

The Minister to reply. Again I must point out that all we can do on Financial Resolutions is ask brief questions.

Mr. Colley

I do not conveniently have the figures that Deputy Horgan is looking for, although I have given the global consequences of the different steps. As he said perhaps at a later stage the precise details can be furnished. As regards the operation of this, the tables issued show how it works in different cases. From what has been said by Deputies from the Fine Gael and Labour parties, I think what is concerning them here is the principle involved.

It would be utterly dishonest of anybody to talk in terms of reducing the child tax allowance and to suppress all reference to what is happening at the same time in regard to children's allowances, social welfare children's allowances, cash allowances and so on. Of course one cannot treat one separately from the other. Of course the two are tied together, of course the reasoning is that by doing what we did we have been enabled to give more money in cash to people receiving children's allowances but at the same time ensuring that the full benefit goes to those who are worst off, those who are paying no income tax, and that includes the people who are being taken out of the tax net that Deputy Horgan referred to. By taking them out of the tax net one of the consequences for them, apart from others, is that if they qualify for payment of the social welfare children's allowances they get them in full. There is no clawback of any kind. Similarly by doing this we are ensuring that the people on the lowest tax band are getting the maximum benefit as compared with those on the highest tax band who are getting the least benefit. That is why that is done. That is why the combination of these two things, the increase in the actual cash allowance and the reduction in the child income tax allowance, enables us to give more to the lower paid, to those who are so badly off that they are not liable to income tax, for instance people on social welfare, and at the same time restrict the benefits of that to the higher paid.

I noted with considerable interest that Fine Gael and Labour Deputies have gone on record in discussing this financial resolution as being opposed to that principle; so be it, and they are going to vote against it; so be it, and the people will note that with interest.

Mr. M.P. Murphy

Under the Minister's proposal a person with a taxable income of £1,500, which is not a very high figure, will have to pay an extra £65 in tax, an increase, from £350 to £415. That is an indication of what will happen to a person with a relatively small taxable income. To a large extent this extra tax will offset the allowances granted under the increased personal and married allowances.

Mr. Colley

No such person will pay more tax.

Mr. M.P. Murphy

He will pay £65 extra on his taxable income.

Mr. Colley

The Deputy has it wrong.

An Leas-Cheann Comhairle

I am putting the motion.

Mr. Enright

In regard to the changes——

An Leas-Cheann Comhairle

We have concluded.

Mr. Enright

In regard to the national changes in the income tax for farmers——

An Leas-Cheann Comhairle

We are not dealing with that at the moment. I am putting the motion.

Question put.

The Dáil divided: Tá, 75; Níl, 55.

Tá

• Ahern, Bertie.
• Ahern, Kit.
• Allen, Lorcan.
• Andrews, David
• Andrews, Niall.
• Aylward, Liam.
• Barrett, Sylvester.
• Brady, Gerard.
• Brady, Vincent.
• Briscoe, Ben.
• Brosnan, Seán.
• Browne, Seán.
• Burke, Raphael P.
• Callanan, John.
• Calleary, Seán.
• Cogan, Barry.
• Colley, George.
• Collins, Gerard.
• Conaghan, Hugh.
• Connolly, Gerard.
• Cowen, Bernard.
• Cronin, Jerry.
• Daly, Brendan.
• Davern, Noel.
• deValera, Síle.
• Farrell, Joe.
• Lynch, Jack.
• McCreevy, Charlie.
• McEllistrim, Thomas.
• MacSharry, Ray.
• Meaney, Tom.
• Molloy, Robert.
• Moore, Seán.
• Morley, P. J.
• Murphy, Ciarán P.
• Nolan, Tom.
• Noonan, Michael.
• O'Connor, Timothy C.
• O'Donoghue, Martin.
• Filgate, Eddie.
• Fitzgerald, Gene.
• Fitzpatrick, Tom (Dublin
• South-Central).
• Fitzsimons, James N.
• Flynn, Pádraig.
• Fox, Christopher J.
• French, Seán.
• Gallagher, Dennis.
• Gallagher, James.
• Gibbons, Jim.
• Haughey, Charles J.
• Herbert, Michael.
• Hussey, Thomas.
• Keegan, Seán.
• Kenneally, William.
• Killeen, Tim.
• Killilea, Mark.
• Lalor, Patrick J.
• Lawlor, Liam.
• Lemass, Eileen.
• Lenihan, Brian.
• Leonard, Jimmy.
• Leonard, Tom.
• Leyden, Terry.
• Loughnane, William.
• O'Hanlon, Rory.
• O'Kennedy, Michael.
• O'Leary, John.
• O'Malley, Desmond.
• Reynolds, Albert.
• Smith, Michael.
• Tunney, Jim.
• Walsh, Joe.
• Walsh, Seán.
• Wilson, John P.
• Woods, Michael J.
• Wyse, Pearse.

Níl

• Barry, Peter.
• Barry, Richard.
• Begley, Michael.
• Belton, Luke.
• Bermingham, Joseph.
• Boland, John.
• Bruton, John.
• Burke, Joan.
• Clinton, Mark.
• Cluskey, Frank.
• Collins, Edward.
• Conlan, John F.
• Corish, Brendan.
• Cosgrave, Liam.
• Cosgrave, Michael J.
• Crotty, Kieran.
• D'Arcy, Michael J.
• Deasy, Martin A.
• Desmond, Barry.
• Desmond, Eileen.
• Donegan, Patrick S.
• Donnellan, John F.
• Enright, Thomas W.
• FitzGerald, Garret.
• Fitzpatrick, Tom (Cavan-Monaghan).
• Flanagan, Oliver J.
• Gilhawley, Eugene.
• Griffin, Brendan.
• Harte, Patrick D.
• Hegarty, Paddy.
• Horgan, John.
• Kavanagh, Liam.
• Keating, Michael.
• Kelly, John.
• Kenny, Enda.
• Lipper, Mick.
• McMahon, Larry.
• Mannion, John M.
• Mitchell, Jim.
• Murphy, Michael P.
• O'Brien, Fergus.
• O'Brien, William.
• O'Connell, John.
• O'Donnell, Tom.
• O'Keeffe, Jim.
• O'Leary, Michael.
• O'Toole, Paddy.
• Pattison, Séamus.
• Quinn, Ruairi.
• Ryan, John J.
• Ryan, Richie.
• Spring, Dan.
• Timmins, Godfrey.
• Tully, James.
• White, James.

Tellers: Tá, Deputies P. Lalor and Briscoe; Níl, Deputies McMahon and B. Desmond.

Question declared carried.