Tony Gregory
Ceist:438 Mr. Gregory asked the Minister for Finance if he will review an anomaly (details supplied) regarding the tax exemption scheme. [17003/02]
Written Answers. - Tax Code.
I assume that the Deputy is referring to the situation whereby the general income tax exemption limits for those aged under 65 years have not been increased since 1998. This is not an anomaly; rather it reflects the policy approach adopted in recent years.
Up to budget 1998, the limits were increased virtually every year with a view to keeping those on very low incomes out of the tax net. However, consistent with the recommendations of the expert working group on the integration of the tax and social welfare, 1996, the limits for those aged under 65 years have not been increased since 1998 – exemption limits for those aged over 65 have been increased. The expert working group considered that the exemption limits should effectively be phased out. There were two reasons for this: at the time, the interaction between the system of marginal relief, which is an integral part of the exemption limits arrangements, and the withdrawal of FIS was seen as potentially giving rise to a negative impact on work incentives as well as causing severe poverty traps for a small number of people in a narrow band of income; and the group held the view that it was difficult to justify, as a matter of principle, the imposition of high marginal rates of tax on low income.
In recent years, low paid individuals have been assisted through increases in personal credits consistent with the expert group's recommendations. For example, as a result of increases in the main personal tax credits, that is, the personal and employee credits, over recent years, the entry point to taxation for a single person is over €209 per week in the current tax year as compared with under €98 per week in 1997.