Michael Noonan
Ceist:252 Mr. Noonan asked the Minister for Finance the estimated cost of increasing allowances to remove all of those on the minimum wage from the tax net; and if he will make a statement on the matter. [23316/00]
Written Answers. - Minimum Wage Tax Exemption.
I am informed by the Revenue Commissioners that the full year costs to the Exchequer, by reference to an income tax year based on 2001 incomes, of the change mentioned by the Deputy are estimated as follows: if the personal allowances for single and widowed persons were increased so that the combined total of the single allowance and PAYE allowance was equal to the level of the minimum wage, based on earnings of £4.40 per hour over an assumed standard 39 hour week and with a pro rata increase of double that amount for married persons, the cost would be of the order of £1,098 million; if the PAYE allowance alone was increased to this level, the cost would be in the region of £762 million; this is less costly as self-employed persons and their spouses are not entitled to avail of this allowance and, in addition, the allowance is not doubled for a married one-earner couple.
The objective of exempting the minimum wage from taxation could also be achieved by increasing the general income tax exemption limit at an estimated cost of approximately £282 million. This would place a very high number of people in the marginal relief system where the marginal tax rate is 40% and would exacerbate the problems of poverty and employment traps for those wishing to return to work or earn more income. These figures are provisional and are likely to be revised.