Vol. 408 No. 8
21 Mr. Deasy asked the Minister for Finance if he has any plans to create a simplified income tax system incorporating PRSI payments, levies and local services charges; the estimated increase in the standard rate of income tax that this would lead to; and if he will make a statement on the matter.
I take it that the Deputy is referring to employee pay-related social insurance contributions, the 1 per cent employment and training levy, the 1.25 per cent health contribution, and domestic service charges under local government legislation. The total yield from these in 1991 is estimated at some £716 million, and to collect this amount in a full year through income tax by increasing the standard rate would mean a standard rate of over 40 per cent. A standard rate of this order would be very difficult to contemplate. As the Deputy will be aware, the standard rate has been reduced from 35 per cent to 29 per cent over the past three budgets, and the Government's aim is to further reduce it to 25 per cent by 1993.
Does the Minister agree that we are really fooling ourselves by pretending that we have a lower rate of taxation than we have? These other forms referred to in the question and in the answer are also taxation. There is a great deal of inequity in PRSI payments and in local charges. People in some areas do not pay local charges at all. The PRSI system is also topsy turvy. Does the Minister see any merit in having a single system and if there was a case for raising money by local authorities to finance local authority projects then it could be done in a fair and honest manner? For the moment we have the worst of all worlds.
I do not regard PRSI contributions as a tax in the sense that Deputy Deasy does, as one is getting benefit from the contributions. Many trade union workers would look at it in that light. A single rate of tax to incorporate all those things would not be fair and equitable; for instance, Dublin city do not impose water charges and other parts of the country do. These charges are a matter of the local authority concerned.
You would hardly call that fair.
It is not equitable.
One could hardly call the existing system fair and equitable.
I would not. We would all like to have the ideal system. However, the Deputy asked me for a view on incorporating those items into a single tax system. I am just giving my view. Of course, everything in the system is not equitable. Health contributions is another area where one is paying for a service. To incorporate all these things into a standard rate of 40 per cent is not on.
(Limerick East): The Minister referred to a total figure from measures other than income tax measures of £716 million. How much of that relates to local charges?
A sum of £30 million is the component for local charges.
That is 0.3 per cent of the total local authority revenue and they have 90 per cent of the aggravation.
The Minister is basically saying that people who are paying the various levies, local charges and PRSI are paying the equivalent of 40 per cent cent standard rate income tax.
Yes, that is true. The Deputy wants a 40 per cent standard rate to replace them all.
Why not face up to it?
I do not accept them as a tax. The PRSI contribution is a contribution for benefits.
