Vol. 488 No. 1
22 Mr. Yates asked the Minister for Finance the way in which he proposes, in future years, to honour his commitment to ensure that 80 per cent of taxpayers pay tax at the standard rate in view of the increase in the number of persons paying tax in 1998; and if he will make a statement on the matter. [5807/98]
The Government's An Action Programme for the Millennium contained a number of commitments in the area of taxation. I am glad to say that the last budget gave me the opportunity to advance these commitments significantly.
My priority in the 1998 budget was to increase the personal allowances and reduce tax rates. Personal allowances were increased by £250 in the case of a single person and £500 for a married couple. Both the standard and top rates of income tax were reduced by 2 per cent. Furthermore, the PRSI free allowance was increased by £20 to £100 per week for full rate PRSI contributors.
Due to the considerable cost of these measures it was only possible in the budget to widen the bands by £100 single and £200 married. In the light of the above, and allowing for growth in incomes, it is estimated that the proportion of taxpayers who are taxed at the standard rate of income tax will decline slightly in the coming tax year.
The commitments set out in An Action Programme for the Millennium, including increasing the proportion of taxpayers being taxed at the standard rate, will be implemented over the five year period of the programme. However, as stated in the programme, the full implementation of the measures will depend on continued strong growth in the economy, as all policies will be subject to the overriding requirement to stay within the terms of the EU Stability and Growth Pact and the Maastricht criteria. The precise changes to be included in any budget will of course be decided at budget time each year.
I thank the Minister for his reply. Is he aware of figures released by his Department showing that 18,000 more taxpayers will move from the standard to the higher tax rate under his budgetary proposals? This runs counter to his promise in the programme for Government. Is he also aware that in reply to a written question on 9 December, he stated that the percentage of taxpayers liable to pay income tax at the standard rate will increase from 37 per cent to 38.2 per cent after the budget? Contrary to the commitments in the programme for Government, the position for those on the standard rate will worsen after this budget. Does the Minister accept that the commitment in the programme for Government is meaningless in the context of his first budget?
I do not accept the contentions put forward by the Deputy. This year's budget cut both the top and standard rates of tax by 2 per cent. It must also be borne in mind that average growth in incomes has increased and that there are greater numbers of people at work due to the high economic growth of recent years. The average rate of tax paid by single and married people in the tax year 1998/9 will fall considerably as opposed to 1996/7. I have pointed out these facts on a number of occasions and I do so again. The Government intends to implement the objectives of An Action Programme for the Millennium over its five year term.
Would the Minister not agree that focusing on cutting the top rate of tax from 48 per cent to 46 per cent confers undue benefit on the big punter as against the small punter? By failing to put resources into bands and allowances it has the same effect. Would he not agree that a consistent theme running through his tenure as Minister for Finance, in relation to the Ansbacher accounts as opposed to the treatment of the credit unions, for example, is that he has favoured the big punter over the small one?
I reject that as a load of nonsense. The budget debate about rich and poor revolves around the following: is a single person earning £13,000 poor as opposed to a single person earning £15,000? Is the married couple earning £27,000 deemed rich? That is the kind of debate we are having. The total tax concessions in the budget were of the order of £517 million. Of that figure, £104 million, 20 per cent, represented the adjustments to the top rate of income tax. I have rebutted these arguments on many occasions and I hear them repeated now by the Deputy and others. I do not blame them for doing so as I am aware that there are events taking place north and south of this House within the next week and I would not expect the Deputy to say anything else. I also reject the arguments put forward by the Deputy's colleagues on the front bench and by other commentators and lobbyists outside this House. It is a load of gibberish.
Is the Minister not aware that despite his assertions, all the expert groups on poverty and ICTU have stated that the budget was misguided in cutting the top rate of tax as against putting the resources into widening the standard rate band and increasing personal allowances? Would he not accept that, as his own figures indicate, 37 per cent of taxpayers previously paid tax at the standard rate but 38.2 per cent will do so after his budget? We are moving in the opposite direction to the Government's commitment. Would the Minister not accept that the consensus outside the House is not part of political propaganda from this side of the House but an acknowledgment that the Fianna Fáil-PD alliance favours the rich to the virtual exclusion of the average worker?
The only contention with which I agree is that the number of taxpayers paying tax at the top rate will increase from 37 per cent to 38.2 per cent. I totally reject all the other contentions made by the Deputy. I also reject the nonsense by some of the leading lobbyists in this area that there is only one way to reduce taxation. I am on the record both inside and outside the House as totally rejecting the assertion that the only way to reduce the average rates of tax is to increase personal allowances and bands.
It is the only fair way.
I have consistently rejected this assertion and I do so again today.
Deputy De Rossa's party quoted CORI's assertions about this year's budget. I read into the record of the House last week what it said about last year's budget, which was introduced by the rainbow Government. It used the same phraseology in relation to both budgets. This proves that unless one introduces a budget which meets its wishes then it will not accept it.
I reject the Deputy's contentions and the points made by his party about the budget. I do not subscribe to these views and it will become obvious during my term of office that the public does not subscribe to them either.
Politics for the contented.
