asked the Minister for Finance the proposals he has for tax reform to reduce the disproportionate tax burden presently borne by the PAYE sector.
Ceisteanna—Questions. Oral Answers. - Tax Reform.
1.
The medium term policy of the Government with regard to reform of the taxation system is set out in chapter 6 of the national plan, Building on Reality. In so far as the PAYE sector is concerned the plan pledges that the Government will, over the period of the plan, adjust tax bands and allowances each year so that the overall income tax burden on taxpayers will not increase. The relief provided in the 1985 Budget for PAYE taxpayers met this pledge in respect of the first year of the plan.
Would the Minister not agree that the tax payable by the PAYE sector in 1985 will be higher than that taken from them in 1984 and that, in effect, the take-home pay of most PAYE workers will have seen no improvement?
It is a matter of fact set out in the various budgetary documents published that total income tax revenue in 1985 will be greater than in 1984. The projection for total income tax revenue for 1985 is £2.13 billion and the outturn for 1984 is £1.966 billion. As far as PAYE receipts are concerned, to the extent that they can be estimated, the outturn for 1984 was £1,682 million and the projection for 1985 is £1,860 million. In 1984 PAYE tax accounted for 86 per cent of total income tax. We expect that that proportion will be about 87 per cent in 1985. The total income base on which tax is being levied will increase by an amount much larger than the extra taxation, so that the relative burden of taxation is going down. Had we not made the changes we made in the budget, the expected tax revenue from income tax and PAYE in 1985 would be considerably larger than it is now. It is not true to say that the burden is increasing.
Will the Minister agree that there is an inequitable situation disclosed by the Minister's figures and does he propose to do anything about implementing the recommendations of the income tax commission about which he has spoken in his last three budget speeches and, if so, what proposals will the Minister adopt from that report?
I do not entirely agree with the Deputy that the figures I have given out show an inequity. The vast bulk of total income is employee income, so it is natural that a large proportion of total income tax receipts come from employees. As far as the First Report of the Commission on Taxation is concerned, I would be happy to have a debate with the Deputy——
Not here.
It is not in order here. But Deputies should think about this: were we to introduce the main recommendation of the Commission on Taxation, that is, a single rate of income tax on all income with the expenditure tax proposal which most people seem to have forgotten about, the result would be immediately a single tax rate in the region of 35 per cent, which would substantially increase the tax burden on people at the lower end of the income tax scale. I do not think that is what the Deputy would have in mind.
Not necessarily.
I am calling Deputy De Rossa.
Is the Minister coming to firm conclusions——
I am calling Deputy De Rossa.
Will the Minister specify any steps he is taking to ease the burden on the PAYE taxpayer, particularly in relation to the special 1 per cent income levy, and whether or not he intends to change the situation where tax is levied on total income even though there are health contributions, Youth Employment Agency levies and so on deducted from the gross figure?
I will not detail all the steps because that would require a rerun of the budget provisions in relation to income tax for 1983, 1984 and 1985. I will draw attention to the changes in this year's budget — the increase in personal allowances, the increases in the exemption limits, the increases in the various associated limits, the fact that we have reduced the number of tax rates to three, the fact that we have reduced the top tax rate from 65 per cent to 60 per cent, that we have replaced the two central rates of 45 per cent and 55 per cent by a single rate at 48 per cent. This combination of measures means that for any given taxpayer a bigger proportion of income is now liable to income tax at a lower rate than it was heretofore.
As far as the 1 per cent levy is concerned, in 1984 we exempted incomes up to a certain level from the operation of that. We increased the level of that exemption this year, and I remind Deputy De Rossa that in chapter 6 of the plan we made the firm statement that that levy will be phased out as soon as possible. Those are just the most recent measures. A longer list would take far longer to give out.