It is the Government's policy to continue, within responsible budgetary parameters, the process of tax reform as an important element in overall employment strategy. The programme, A Government of Renewal states that the Government will accelerate the reform of the tax system, in particular to relieve the tax and PRSI burden on those with low incomes and especially those with families. Tax reform will favour the incentive to work, aim to reduce the tax wedge, and encourage enterprise development and growth.
In line with this policy, I have, in my two budgets, made significant increases in the exemption limits and personal allowances, and considerably widened the standard bands. I have also introduced a new PRSI-free allowance of £80 per week for most employees. Furthermore, the lower rate of employers' PRSI contributions has been reduced from 9 per cent to 8.5 per cent and the income threshold applying to it increased from £173 per week to £250 per week (from £9,000 to £13,000 per annum). These measures will increase take-home pay, especially in the case of lower paid workers, thereby making employment more attractive and will continue the progress being made in reducing both the employees' average tax burden and the overall tax wedge.