First of all, let me make it clear that in the preparation of any Budget, there is no law, no moral obligation or no tradition or custom which inhibits the Minister for Finance from taking such action in relation to changes in the rate of taxation as appear to him to be the most appropriate in the light of the economic circumstances with which he is dealing.
Secondly, I have referred to the fact that the Budget this year was framed in a context in which it was necessary to reduce the rate of increase in Government expenditure to ensure that no action taken in the Budget would have any effect on the operation of the National Pay Agreement, and, at the same time, to provide reliefs in the sum of approximately £9 million. Faced with this situation and having examined the various possibilities, it seemed to me that the most effective and appropriate way in which a substantial portion of that £9 million available and required for redistribution could be raised was as indicated in section 2 of this Bill. Allowing for the concessions which were also introduced and which are dealt with in later sections, the net effect of section 2 and the other sections giving the concessions, will be to yield £5 million in the current year. This is, of course, a substantial portion of the £9 million which is being redistributed.
For the reasons which I have indicated, it was not possible to raise this money by means of indirect taxation. It would have been possible to raise it by increasing the standard rate of income tax but there were a number of objections to this. One of these was that this would, of course, apply to companies whose rate of tax had already been increased last autumn from 50 per cent to 58 per cent. Weighing all the circumstances together, this appeared to me to be the most appropriate way in which to do it. I would remind the House that the impact of section 2 will be less than £12 per annum in the case of any taxpayer. Furthermore, it must be weighed in conjunction with the other concessions the effect of which is to remove from the tax net approximately 20,000 taxpayers and to reduce the income tax paid by approximately 40,000 taxpayers. I do not think it can be said, taking these sections together, which one must do to get the financial picture, that there is any great hardship being imposed on anybody. Nevertheless, it provides for us the bulk of the revenue necessary for the various concessions announced in the Budget.
To suggest that it could have been raised simply by increasing the rate of tax for people in the higher income group is quite unrealistic. Unfortunately, we do not have enough people in the higher income group to make it possible to get that kind of money without an absolutely penal increase in the rate of tax which they pay, the effect of which would be to ensure that the yield went down instead of up. Having regard to the constraints which I have mentioned, this was the only way open to us, but, as I say, it has not operated to create any real hardship for anybody. In those circumstances, I feel the section is deserving of the support of the Seanad.
As anticipated by Senator Boland, I do not have a figure for the estimate of the cost of the administrative arrangements which were necessary. I would remind Senator Boland again that the net yield estimated in the current year from this and the concessions being given in other sections, is £5 million.