Written Answers. - Tax Allowances.
Gerry Reynolds
Ceist:
450
Mr. G. Reynolds
asked the
Minister for Finance
the reason self-employed and professional families can avoid paying tax at the higher rate until they have earnings up to 67,200, while the limit for single income PAYE families is 34,800; and the number of families disadvantaged by this policy decision.
[2688/02]
Gerry Reynolds
Ceist:
451
Mr. G. Reynolds
asked the
Minister for Finance
the reason self-employed and professional families will pay 7,200 less in tax on their stated income than the PAYE family; and his views on the tax individualisation scheme.
[2689/02]
I propose to take Questions Nos. 450 and 451 together.
I am unclear as to the precise nature of the Deputy's questions, the import of which appears to be that under the income tax system the self-employed face less of a tax burden than those on the same income in the PAYE sector and that the threshold above which tax at the higher rate must be paid is lower for those in PAYE sector than for those who are self-employed. Self-employed persons are subject to exactly the same income tax rates, bands and credits as those in the PAYE sector. The one notable exception to this is that those who are employees rather than self- employed are entitled to an employee tax credit, formerly known as the PAYE credit, which is not available to the self-employed.
As regards the issue of widening the standard rate band, the Deputy will be aware of the Government's target, shared with the social partners in the PPF and set out in the PPF agreement, to have 80% of income earners paying tax at no more than the standard rate. Band widening is the only method to take people out of the top rate of tax now that tax credits have been introduced. It should also be noted that the PPF provides that the social partners support the policy of establishing a single standard rate band for all individual taxpayers.
Before the move to widen the standard rate band in budget 2000, single people on incomes less than the average industrial wage were paying at the top rate. For example, single persons on the then average industrial wage of about 22,750 were taxed at the top rate on their marginal income. Budget 2002 has increased the amount for a single person which is taxable at the standard rate to approximately 105% of the average industrial wage for 2002, as projected by my Department. As a result of budget 2002 we are now in a position where 27% of income earners pay tax at the top rate, an improvement of three percentage points on the pre-budget position.
Jim Mitchell
Ceist:
452
Mr. J. Mitchell
asked the
Minister for Finance
the tax exemption limits for widows and elderly persons; his plans to augment or improve these exemption limits; and if he will make a statement on the matter.
[2717/02]
In budget 2002, I increased the income tax exemption limits for those aged 65 and over by over 20% to 13,000 for single and widowed persons and to 26,000 for married persons. In addition to the above exemption limits, I point out that in the year of bereavement, a widowed person may receive a personal tax credit which is equivalent in value to the married tax credit. In budget 2002, I increased the value of this credit from 2,794 to 3,040. Following the year of bereavement, a widowed parent with a qualifying child or children may qualify for the one-parent family tax credit of 1,520 in addition to the single personal tax credit of 1,520.
A further credit, the widowed parent credit, is available on a sliding scale for the first five tax years following the year of bereavement. In budget 2002, I also increased these credits significantly to the following:
|
|
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Year 1
|
2,600
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Year 2
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2,100
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Year 3
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1,600
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Year 4
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1,100
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Year 5
|
600
|
Therefore, in the first year following bereavement, a widowed parent would be entitled to aggregate tax credits of 5,640, comprising a single personal credit of 1,520, a one-parent family credit of 1,520 and a widowed parent credit of 2,600.
For widowed persons with no dependent children, a tax credit which is additional to the basic single personal credit is available after the year of bereavement. In budget 2002, I increased the value of this credit by over 18% to 300. Accordingly, such widowed persons may receive personal tax credits with an aggregate value of 1,820, comprising 300 plus the single personal tax credit of 1,520. I have no plans at this point to increase the above limits further.
