Dáil Éireann díospóireacht -
Wednesday, 25 Jan 1984

Vol. 347 No. 4

Financial Resolution No. 10: Income Levy.

Minister for Finance (Mr. Dukes)

I move:

(1) That section 16 of the Finance Act, 1983 (No. 15 of 1983), shall be amended—

(a) by the substitution of the following paragraph for paragraph (v) of subsection (2):

"(v) in section 1 (1) of the Act, the following definition shall be substituted for the definition of `contribution year':

` "contribution year" means a year of assessment within the meaning of the Income Tax Acts being the year 1983-84 or the year 1984-85;' ",

and

(b) by the insertion of the following proviso after subsection (2):

"Provided that an individual shall not be liable to pay income levy—

(a) in respect of any payment on account of emoluments made in the contribution year (within the meaning of the Youth Employment Agency Act, 1981, as modified by this section) 1984-85 if his reckonable income consists of emoluments only in that year and the amount of the payment does not exceed an amount equal to £96 where the period in respect of which the payment is made is a week or a corresponding amount where the period in respect of which the payment is made is greater or less than a week, or

(b) in respect of his reckonable income for the contribution year (within the meaning of the Youth Employment Agency Act, 1981, as modified by this section) 1984-85 if such income does not consist of emoluments only and the amount of that income does not exceed £5,000 in that year.".

(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. Cluskey

I would like to ask your guidance in relation to an item in the Minister's speech under the heading of Taxation of Petroleum Development Operations. As it is not specifically related to any Resolution I gather that this is as appropriate a time as any other to ask the Minister, in view of the very ambiguous nature of the statement——

An Ceann Comhairle

If it is not related to any Resolution I suggest that perhaps the General Resolution would be the time to deal with it.

Mr. Haughey

It is worth exploring all the same.

An Ceann Comhairle

The Resolution we are dealing with now deals with the income levy. I understand that the General Resolution is a sort of free for all.

Mr. Cluskey

I take it that your guidance is that I wait for the General Resolution.

An Ceann Comhairle

That is my suggestion.

Mr. Haughey

I assure Deputy Cluskey when we come to the General Resolution we will all be very interested in exploring a little further that particular slightly vague reference in the Minister's speech today.

Mr. Cluskey

Yes, but the Deputy will probably hit a dry well.

Mr. Haughey

Perhaps if I do the Deputy will strike oil. We have not much time to dispose of the remaining Resolution. I want to explain to the House that our side will oppose this Resolution. This Resolution was introduced last year as a once off, very special, ad hoc measure. The explanation given at the time was that it was to deal with the special employment situation. It has been in operation for a year and it has contributed very substantially to the burden of taxation about which this side of the House have been adverting to on so many occasions and which the Minister has also made many references to. It is very difficult to justify, on any grounds, the continuation of this levy into 1984. It falls very directly and very specifically on one particular sector of the tax-paying community and, as has always been pointed out, levies by their nature are inequitable. They make no allowance whatever for the different circumstances of different taxpayers. They naturally fall much more heavily on the lower paid than on the higher paid section of the work force.

I believe that whatever justification there would be for the imposition of this very unfair, blunt instrument type of levy in a situation where the Government were setting out to achieve some particular economic or financial objectives in a budget, there can be no possible reason for maintaining it in the type of budget we have before the House today which everyone recognises as being a nonevent, a budget which has no strategy, which makes no contribution to any particular social, economic or financial objectives, which really is a compromise budget representing the lowest common denominator between these two warring factions in the Government. In the context of that sort of budget there is no justification of any kind for the retention of this unfair, inequitable levy.

This side of the House on one occasion foolishly agreed not to oppose a levy introduced in the name of youth employment. We were completely misled in that connection because the money raised from that 1 per cent youth employment levy has been diverted into all types of Exchequer channels. It is certainly not being used to create youth employment. Neither has the money raised by this particular levy made any contribution to any sort of employment, youth or otherwise. There can be no justification for continuing this levy on economic, financial or social grounds. It is an unfair imposition and is an inequitable burden on one particular section of the community. When it was introduced it was stated it would be for one year only for specific purposes and it is a complete deception of the PAYE sector to maintain it again this year. We are opposing it.

Mr. S. Brennan

I would like to ask the Minister a number of questions regarding the income levy he is proposing to reintroduce. I see the Minister is proposing to exempt people earning £96 or less per week. I take it that this £96 is the gross earnings of a person in a week as opposed to the take-home pay. Secondly, does that £96 per week represent social welfare income? If a person has over that amount in some benefits would that be included? Thirdly, the self-employed exemption will apply where income for the year is less than £5,000. I take it that that will be on the old accounts system, the Schedule B system, where they will be assessed in the ordinary way and the £5,000 will be made out in their annual accounts and on their annual accounts will be decided how much they were earning. That means in effect that the 1 per cent if it is payable will not be payable in that year but when the accounts are finally settled, which is often a year, 18 months, two years or even longer afterwards and there could be a major postponement in that area.

How many people are paying this levy and how many will be paying it in the forthcoming year? How many people will be exempted in this new exemption which the Minister is bringing in now? In other words, how many people next year will be earning £96 or less per week? How many will the Minister be taking out of the net?

In conclusion, I make the point that the Minister will need an army of administrators to decide very firmly which side of the £96 per week many people fall. At the end of the day this to an extent accounts to more fiddling around with the system. It will cost a great deal of money to find precisely who is and who is not on that £96. It would be far better to get rid of the whole thing and stop bringing in these arbitrary fences on one side of which people are caught and on the other side people are not caught. The effect is that in cases like this you just push decent people into the old black economy area. Decent people because of the pressures of trying to live today do not want to be pushed into that. By setting up these fences of £96 here, ten years old there and so on you are encouraging people to think black economy more and more. I would not wish that to happen but unfortunately I think it will happen.

I support and admire the attempt to take low income people out of any taxation system and I see what the Minister is trying to do there, but it will not work. It is an arbitrary figure which will require a large number of people to implement it and it would be far better and cheaper to get rid of the income levy altogether.

An Ceann Comhairle

Deputy MacSharry.

Mr. MacSharry

Does the Minister want to respond?

An Ceann Comhairle

There is not much time left and I propose to call the Minister before 11.55 p.m.

Mr. MacSharry

I know that but he is entitled to respond. The figures given in his budget speech today were that the yield would be £40 million from this levy and that was in the budget arithmetic at the end of the speech, but in the explanatory notes accompanying the budget that figure goes to £74 million. Could he explain that? Is it a genuine mistake or does it put out all the calculations on current revenue for 1983 and 1984?

The major point I wanted to make is that in the main the PAYE sector will be paying £328 million more income tax in 1984 than they did in 1983. More important, the Government themselves are taking into account the fact that there will be an increase of 25,000 on unemployment and today they are exempting 15,000 people from liability for tax. Therefore, now they are expecting 40,000 fewer people to pay £328 million more income tax in 1984 over and above 1983. As the year progresses the burden of income tax will become so severe that, even though many people feel themselves lucky to have a job, they will find before this year is out that they cannot afford to have one.

Mr. De Rossa

I want to express my opposition to this 1 per cent levy. It was introduced as a temporary measure last year. There is no reference in the Minister's speech this year that this is a temporary measure any longer. He has not promised in his speech to eliminate the levy next year or to reduce it. We can assume that if he can get away with it and is still in Government this time next year he will attempt to increase it.

I ask the Minister to tell me in his reply whether the 1 per cent levy last year was paid by any sector other than the PAYE sector. We know already that certain sectors do not pay their full share of the health contribution or youth employment levy. Will the 1 per cent levy which the PAYE sector are trapped into paying and which they cannot avoid be paid by any other section? What proportion of those who are entitled to pay it, apart from the PAYE sector, have paid it? What action does the Minister propose to take to ensure that others pay the 1 per cent levy along with the PAYE sector?

It is useful to refer once again to the Programme for Government under which the Coalition, the Fine Gael and Labour Parties came into power. It is said that if you miss The Irish Times you miss part of the day. If you have missed this dogeared issue which I have here you have missed part of what is going on in Government. It is dated 13 December 1982 and it refers to property tax, heavy capital taxation and PRSI reductions. The result of the two budgets which the present Coalition Government have brought in to date practically deny everything they put down in black and white in their Programme for Government.

Mr. G. Mitchell

Will the Minister explain to the House what the distinction is between the public service and those not in the public service in regard to the payment of this levy and the numbers in the public service who are exempt from the payment of this levy? In view of the fact that this revenue generally is coming in to the Government and is being extended to assist those who are unemployed, can the fact that certain members of the public service are not paying this levy continue to be justified?

An Ceann Comhairle

The Minister to reply.

Mr. Haughey

We will let him conclude.

Minister for Finance (Mr. Dukes)

The levy we are speaking of is one which applies to all incomes with the exception of certain kinds of social welfare payments. I would like to list those areas of social welfare payments that are not included in the definition for the purpose of this levy. They are: widows' contributory and non-contributory pensions, deserted wife's benefit, deserted wife's allowance, death benefit by way of widow's pension, social assistance allowance or payment equivalent to widow's contributory pension or death benefit by way of widow's pension payable by another EEC member state. All income apart from those categories of income fall to be considered in the base for this 1 per cent levy.

The question was raised as to what the numbers of people involved in relation to this levy are. Without the change which I am now proposing to make 1.138 million people would have been paying that levy during 1984-85 tax year. This change will remove 350,000 people from the scope of application of the levy. The levy will be removed so far as those who are earning £96 per week or less are concerned. In the case of employed persons that would be handled simply by the issue of an instruction to employers that the levy is not chargeable for employees who in any given week earn £96 or less. Therefore, if in a given week an employee earns £95, the employer will not deduct the 1 per cent levy.

Mr. S. Brennan

Is the Minister talking of £95 gross?

Mr. Dukes

If, in a different given week in the same tax year the employee earns £100 or more, the 1 per cent levy will be deducted. That is the simplest way to operate this measure. We will not need the army of people that Deputy Brennan thought might be needed.

So far as the self-employed are concerned, since we can assess their income only after the year when they have produced their accounts, the system we will use will be to refund the self-employed who show that they have earned less than £5,000 in that year any amount of levy for which they would have been liable and which would have been paid during the course of the year.

Deputy Brennan raised the question of whether this will encourage people into the black economy. The Deputy seemed to be under the impression that that would happen because in some way people would be changing the amount of income they had declared in order to be within or outside the levy. It is not a question of a fence of that kind. It is an objective measure of how much, for the majority of people, they would have been paid. It is a simple question to decide whether in a given week the 1 per cent levy is payable. I noticed that earlier Deputy Brennan was not making any point about fences when we were talking about tax bands which are just as much fences as is the kind of measure we are talking about.

Mr. S. Brennan

I was talking of giving 88p to people with more than £10,000.

Mr. Dukes

Perhaps the Deputy is making more of this than even he thinks is justified. So far as Deputy MacSharry's question is concerned, the income levy, were it not to be changed, would have raised £45 million this year. The change I am bringing about will reduce the total take from it by £5 million, bringing the figure down to £40 million.

Mr. MacSharry

I said that the figure would be £74 million in 1984.

Mr. Dukes

No. It is clear. The 1 per cent levy will be renewed for a further year.

Mr. MacSharry

According to page 18, the income levy is £40.1 million in 1983 and £74 million in 1984. I listened to the Minister's statement and I know the difference between the £45 million and the £40 million, but I am asking him what is the difference between the £40 million now and the £74 million as in the table on page 18.

Mr. Haughey

That is a six-marker.

Mr. MacSharry

There is £34 million short.

Mr. Power

This seems to be a question on which the team will have to confer.

Mr. Dukes

I must re-confirm the situation in that regard. So far as the levy is concerned, were we not to make the change, it would produce £45 million in 1984 while £40 million is the altered amount after making the change we propose here.

Deputy De Rossa raised the question as to whether the levy was paid by any sector other than the PAYE sector. The levy applies to all incomes, and all those who are earning an income from whatever source are liable to pay the levy from the 1984-85 tax year onwards. The collection of all these levies will be undertaken by the Revenue Commissioners rather than by the health boards as had been the case. There had been difficulties in relation to the collection of these levies because the health boards did not have access to the kind of information they would need to enable them to implement the levy. For the first time the collection of the levy is being centralised with the Revenue Commissioners.

Deputy Mitchell raised the question as to whether there was a distinction between employees in the public service and those in other sectors so far as the levy is concerned. There is no distinction. This levy is payable by public sector employees just as much as it is payable by any other employees To come back to Deputy MacSharry's question relating to the table on page 17 of the explanatory document ——

Mr. MacSharry

It is page 18 on the documentation we have.

Mr. Dukes

The table I have is the one headed "Current Revenue 1983-1984". The £40 million figure which I have given as the revenue from the levy as adjusted by this measure covers the period April to December 1984 while the figure of £74 million covers the calender year 1984. We are comparing there the outturn for the 12 months of 1983 with the outturn for the 12 months for 1984 as set out in these figures.

Mr. MacSharry

The figure according to the budget arithmetic is £40 million. I assume that these figures on the yellow pages correspond with the arithmetic as given to us today. Otherwise, the whole thing has not only been cooked but has been roasted.

Mr. Molony

The Deputy would know all about that.

(Interruptions.)

An Ceann Comhairle

Order, please. The Minister, without interruption.

Mr. Dukes

At the column for 1984 in which there appears revenue of £74 million, the period covered is the 12 months of 1984. The column for 1983 shows £40 million which is the total income for the year 1983. The levy was in operation for nine months of that year.

Mr. MacSharry

We understand all that but can the Minister tell us whether the budget arithmetic is for nine months of 1984?

Mr. Dukes

It includes the figure for the adjustment for the remainder of the year 1984.

Mr. MacSharry

Why, then, did the Minister not mention in his budget speech the £74 million from this income levy since it is taken into the explanatory tables? Is he trying to hide the fact that the yield from this income levy this year will be £74 million and not £40 million as reduced from the £45 million?

Mr. Dukes

I have clarified that. Of course it is recognised that a levy of this kind has a particularly heavy effect on people at lower income levels and that is precisely why I am making the change.

(Interruptions.)

An Ceann Comhairle

Order, please.

Mr. Manning

Perhaps it is a question of a bad printing press.

Mr. Dukes

Deputy Haughey has some experience of levies. I invite him to reflect on his experience regarding a 2 per cent levy that he attempted to bring in in 1979, though I gather he is not taking responsibility for decisions of that kind taken at that time.

Mr. Haughey

The Minister should stick to the point.

An Ceann Comhairle

I am putting the question.

Mr. Lenihan

There is nothing sacrosanct about this arrangement.

An Ceann Comhairle

I am putting the question in accordance with an order of the House.

Mr. MacSharry

It is important that the Minister be given an opportunity of clarifying the question we have put to him and that he explain fully the difference of £34 million.

Question put.

The Dáil divided: Tá, 81; Níl, 73.

Tá

• Allen, Bernard.
• Barnes, Monica.
• Barrett, Seán.
• Barry, Myra.
• Barry, Peter.
• Begley, Michael.
• Bell, Michael.
• Bermingham, Joe.
• Birmingham, George Martin.
• Boland, John.
• Bruton John.
• Bruton, Richard.
• Burke, Liam.
• Carey, Donal.
• Cluskey, Frank.
• Collins, Edward.
• Conlon, John F.
• Connaughton, Paul.
• Coogan, Fintan.
• Cooney, Patrick Mark.
• Cosgrave, Liam T.
• Cosgrave, Michael Joe.
• Coveney, Hugh.
• Creed, Donal.
• Crotty, Kieran.
• McGahon, Brendan
• McGinley, Dinny.
• McLoughlin, Frank.
• Manning, Maurice.
• Mitchell, Gay.
• Mitchell, Jim.
• Molony, David.
• Moynihan, Michael.
• Naughten, Liam.
• Nealon, Ted.
• Noonan, Michael. (Limerick East).
• O'Brien, Fergus.
• O'Brien, Willie.
• O'Keeffe, Jim
• O'Leary, Michael
• D'Arcy, Michael.
• Deasy, Martin Austin.
• Desmond, Barry.
• Desmond, Eileen.
• Donnellan, John.
• Dowling, Dick.
• Doyle, Avril.
• Doyle, Joe.
• Dukes, Alan.
• Durkan, Bernard J.
• Farrelly, John V.
• Fennell, Nuala.
• FitzGerald, Garret.
• Flaherty, Mary.
• Glenn, Alice.
• Griffin, Brendan.
• Harte, Patrick D.
• Hegarty, Paddy.
• Hussey, Gemma.
• Kavanagh, Liam.
• Keating, Michael.
• Kelly, John
• Kenny, Enda.
• L'Estrange, Gerry.
• McCartin, Joe.
• O'Sullivan, Toddy.
• O'Toole, Paddy.
• Owen, Nora.
• Pattison, Séamus
• Prendergast, Frank.
• Quinn, Ruairí.
• Ryan, John.
• Shatter, Alan.
• Sheehan, Patrick Joseph.
• Skelly, Liam.
• Spring, Dick
• Taylor, Mervyn.
• Taylor-Quinn, Madeline.
• Timmins, Godfrey.
• Treacy, Seán.
• Yates, Ivan.

Níl

• Ahern, Bertie.
• Ahern, Michael.
• Andrews, David.
• Andrews, Niall.
• Aylward, Liam.
• Barrett, Michael.
• Barrett, Sylvester.
• Brady, Gerard.
• Brady, Vincent.
• Brennan, Mattie.
• Brennan, Paudge.
• Brennan, Séamus.
• Briscoe, Ben.
• Browne, John.
• Burke, Raphael P.
• Byrne, Hugh.
• Byrne, Seán.
• Calleary, Séan.
• Collins, Gerard.
• Conaghan, Hugh.
• Coughlan, Cathal Seán.
• Daly, Brendan.
• De Rossa, Proinsias.
• Doherty, Seán.
• Fahey, Francis.
• Fahey, Jackie.
• Faulkner, Pádraig.
• Fitzgerald, Gene.
• Fitzgerald, Liam Joseph.
• Fitzsimons, Jim.
• Flynn, Pádraig.
• Foley, Denis.
• Gallagher, Denis.
• Gallagher, Pat Cope.
• Geoghegan-Quinn, Máire.
• Harney, Mary.
• Haughey, Charles J.
• Hilliard, Colm.
• Kirk, Séamus.
• Kitt, Michael.
• Lemass, Eileen.
• Lenihan, Brian.
• Leonard, Jimmy.
• Leonard, Tom.
• Leyden, Terry.
• Lyons, Denis.
• McCarthy, Seán.
• McEllistrim, Tom.
• Mac Giolla, Tomás.
• MacSharry, Ray.
• Molloy, Robert.
• Morley, P.J.
• Moynihan, Donal.
• Nolan, M.J.
• Noonan, Michael J.
• (Limerick West).
• O'Dea, William.
• O'Hanlon, Rory.
• O'Keeffe, Edmond.
• O'Kennedy, Michael.
• O'Leary, John.
• O'Malley, Desmond J.
• Ormonde, Donal.
• O'Rourke, Mary.
• Power, Paddy.
• Reynolds, Albert.
• Treacy, Noel.
• Tunney, Jim.
• Wallace, Dan.
• Walsh, Joe.
• Walsh, Seán.
• Wilson, John P.
• Woods, Michael.
• Wyse, Pearse.

Tellers: Tá, Deputies Barrett (Dún Laoghaire) and Taylor; Níl, Deputies B. Ahern and V. Brady.

Question declared carried.

Financial Resolution agreed to.