Written Answers. - Tax Reforms.
155 Mr. M. Ahern asked the Minister for Finance if he will give details of each tax reform implemented since 1990; if he will give an explanation of the actual reform and the cost/benefit of each reform for each year since; the rationale for the reform; and his views on whether the reform produced the anticipated results. [17013/96]
A summary of the principal tax reform measures taken since 1990 follows.
A cost-benefit analysis of each of these measures separately has not been undertaken. However, the broad thrust has been to reduce the tax burden, broaden the tax base, and to subject tax reliefs to greater scrutiny from an employment generating perspective. While other factors have contributed, the programme of tax reform and reducing the burden of tax on employment in particular has played its part in the economic growth of the past few years.
I would also draw to the Deputy's attention the fact that the average tax take, including PRSI and levies, from a married couple, one earner, two children, earning the average production wage, has fallen from 24.7 per cent in 1989-90 to an estimated 21.6 per cent in 1996-97. For a single person on the same wage level, the average tax take has fallen from 33.3 per cent in 1989-90 to an estimated 28.75 per cent in 1996-97.
Tax Reform Summary 1990-96
A. Income Tax
The top rate of tax was reduced from 56 per cent to 48 per cent; the standard rate of tax from 32 per cent to 27 per cent; the number of rates reduced from 3 to 2.
The standard rate band has been broadened by 54 per cent, compared to an estimated CPI increase over the period of around 19.3 per cent.
General exemption limits increased by 30 per cent.
Personal allowances increased by 29 per cent, of which 23 percentage points occurred in the last three budgets.
Tax relief in respect of rent extended to all individuals in private rented accommodation.
Tax relief on profit sharing has been increased.
Standard-rating of mortgage interest and health insurance reliefs introduced on a phased basis.
Tax relief on covenants withdrawn but retained for elderly, incapacitated etc.
Tax relief on local service charges.
The BES is being more clearly targeted at employment creation. In addition the scheme was extended to entrepreneurs investing in their own small companies.
A new seed capital scheme was introduced, and subsequently improved, to give tax refunds to employees and the unemployed setting up their own new businesses.
A broader measure of tax neutrality for various savings and investment media has been achieved.
Special stock relief provisions for young trained farmers.
The new low rate of employers' PRSI has been reduced to 8½ per cent on earnings up to £250 per week (£13,000 p.a.). The standard rate (12.2 per cent) was reduced to 12 per cent in the 1996 budget.
A special £80 per week PRSI-free allowance for full rate employee contributors — introduced in 1995 and increased in 1996 budget.
Incomes up to £9,750 per annum are now being exempted from Health and Employment and Training levies.
Exemption from both the Health and Employment and Training levies for cross-Border workers and recipients of pensions from certain other EU countries with effect from 6 April 1996.
The standard rate of corporation tax reduced, in stages, from 43 per cent to 38 per cent.
A reduced rate of 30 per cent from 1 April 1996 for the first £50,000 of company/group income otherwise liable at the standard rate.
The surcharge on the undistributed professional income of close service companies has been reduced.
Section 84 loans were further restricted and are currently being phased out.
Tax relief for dividends from Shannon, Export Sales Relief and 10 per cent manufacturing profits was phased out.
Group and Loss relief has been restricted.
Various special concessions for certain financial services companies were abolished and their tax systems rationalised.
Better-focused scheme for incentives for urban renewal, including incentives for specific enterprise areas and certain multi-storey car parks.
Pilot scheme for traditional seaside resorts introduced, with tax incentives for investment in the renewal and updating of tourist facilities and accommodation, similar to the urban renewal scheme.
Tax relief for investment in films made in Ireland to continue in an amended from up to 1999.
Tax relief for foreign branch profits of certain resident companies creating substantial new employment in the State.
Capital Gains Tax standardised at a 40 per cent rate.
A special lower 27 per cent rate introduced for gains by individuals in longer term equity investment in SMEs.
CGT rollover relief introduced to encourage equity investment by entrepreneurs in new and developing businesses.
The annual "small gains exemption" for CGT was halved.
The top two rates of capital acquisitions tax abolished, leaving the top rate at 40 per cent. The rate structure has also been rationalised.
CAT relief for transfers of business assets introduced; rate of relief increased to 75 per cent in 1996 budget.
Indexation of CAT class thresholds has been introduced.
Self-ssessment introduced for CGT.
A probate tax of 2 per cent on all estates (with some exemptions and reliefs) was introduced.
The standard rate of VAT was reduced from 25 per cent to 21 per cent.
VAT rating structure simplified with the abolition of the 10 per cent and 16 per cent rates.
The VAT registration thresholds — applying to small business — increased significantly to £40,000 for goods and £20,000 for services.
VAT at point of entry from other EU states abolished.
Businesses whose turnover does not exceed £250,000 a year can now account for VAT on a cash receipts basis.
Excise duty was abolished on commercial vehicles and excise duty/VRT was reduced on private cars.
Special VRT refund of £1,000 when a car ten years old or more is scrapped and a new car purchased. The scheme lasts up to 31 December 1996.
Current year basis of assessment introduced together with general streamlining of self-assessment.
Major consolidation of income tax, corporation tax, and capital gains tax legislation being undertaken for completion in 1997.
A single tax clearance certificate and a single form for registration for tax introduced.
More effective taxation of benefit-in-kind was introduced.
EU Border controls and documentation ended.