Derek McDowell
Ceist:34 Mr. McDowell asked the Minister for Finance his views on the introduction of tax credits to replace tax free allowances; and if he will make a statement on the matter. [19817/98]
Priority Questions. - Tax Credits.
In my budget speech last December I stated that the Government is open to considering such a move provided that all the complex issues can be fully teased out and the system can be introduced into the tax code in a manageable way. The position has not changed in that regard.
I explained last December that the issues of standard rating and tax credits are the subject of an examination by a special working group set up under Partnership 2000, which is chaired by my Department. This group produced its report last January and is currently engaged in a further examination of the policy and practical issues associated with the introduction of a tax credits system.
I have an open mind on this issue and I look forward to receiving the views of the group for consideration in the run-up to the budget.
I thank the Minister for his response. Does the Minister agree with a quotation in The Irish Times, apparently attributable to a spokeswoman for his Department who I assume to be the press officer, which confirmed that the Department did not see any difficulties in implementing the changes, or is this to be regarded simply as a kite in advance of the budget?
There are not insurmountable difficulties in introducing a tax credits system but the debate on whether such a system would be the most appropriate way to proceed has gone on for some time. There are differing views about this matter. It has been examined by the tax strategy group and, as I indicated in my budget speech last year, I will give the matter further consideration. The matter will be considered between now and budget day.
Do I take it from the Minister that he has not yet received the final report from the Partnership 2000 working group? Does he agree with the suggestion made in the interim report of that group that it would take at least two years to introduce such a tax credits system?
It has been brought to my attention that it is not possible to introduce this system overnight. There has been considerable debate about the tax credits system, as the Deputy is well aware, and there are merits and demerits in the particular suggestion. Last week I read articles by at least three experts who took opposing views on this matter, including a professor of the Economic and Social Research Institute who commented that what is envisaged in a tax credit system could easily be achieved by making some adjustments to the current system. It is a matter for more debate and the Government will make up its mind before the budget in December.
Whatever about other issues, it has been my experience of this Minister that he does have a view on tax issues. While he has neatly disguised the debate which we all know is going on, he has not given the slightest indication of his own view. Does he disagree with the spokeswoman for his Department who seemed to indicate three weeks ago that there is no difficulty in doing that? Perhaps he would indicate if he accepts the advice he was given that it would take two years to introduce such a system.
The spokeswoman for my Department was responding to a debate on a radio show——
With respect, I know what she was responding to. I am asking if the Minister agrees.
A journalist on a radio show gave an indication that it was possible that the Department of Finance was not in a position to implement the tax credit system. The spokeswoman responded to that. Certainly it is possible to have a tax credit system but no decision has been reached as to whether we are going down that road. The spokeswoman was responding to allay any suggestions that the Department of Finance or the Revenue Commissioners were not in a position to go that route. It is possible but the decision is yet to be made as to whether we will do that.
Will it take two years?
The first thing we would have to do is decide in principle to take that route. The implementation of that decision would then have to be worked out.
It is generally accepted, and the Minister will agree, that the tax credits system is fairer. It would restructure the system in a way that would make it possible to introduce further improvements and reductions in income tax which would benefit primarily the less well off. Apart from the practical considerations which will take time, does the Minister agree in principle with going that route?
Last week an eminent research professor at the Economic and Social Research Institute said in a newspaper article that tax credits are not the best way to help the low paid. This is an expert in this field. Another eminent commentator wrote in a different publication the previous week that he wanted to go down the route of tax credits. In a further article the same week we are told to take the way between the two. That is why this matter has been examined.
I have read the articles. I want to find out the Minister's view.
My view is to implement the Government's programme on taxation. I am open to all entreaties on the best way to do that.
The Minister is a fount of wisdom and knowledge.
Thank you, Deputy.