Dáil Éireann Debate, Thursday - 6 May 2004
8 Mr. Costello asked the Minister for Finance when he intends to implement the commitment given in An Agreed Programme for Government to remove all those on the national minimum wage from the tax net; and if he will make a statement on the matter. [12971/04]
Amharc ar fhreagraThe position is that when the statutory minimum wage came into effect in 2000, less than 64% of the annualised figure of €11,330, or £8,923, was exempt from taxation. In budget 2002, 90% of the minimum wage became exempt from tax and in budgets 2003 and 2004, this position has been maintained, even though the minimum wage was increased in October 2002 and February 2004. It currently stands at €7 per hour, having been increased from €6.35 per hour on 1 February 2004. The annualised equivalent of the minimum wage is €14,196.
The Government programme, An Agreed Programme for Government, states that over the next five years the priority will be to achieve a position where all those on the minimum wage are removed from the tax net. The five year period mentioned commenced two years ago when the Government was elected to office. The commitment to exempt the minimum wage from tax is given in the context of a broader economic and budgetary strategy which provides, among other matters, that the public finances will be kept in a healthy condition and that personal and business taxes will be kept down in order to strengthen and maintain the competitive position of the economy.
The current national partnership agreement, Sustaining Progress, contains a commitment in generally similar terms. Accordingly, exemption from tax for those on the minimum wage will be a matter for consideration in the context of the annual budgets over the next number of years consistent with the Government's overall economic and budgetary strategy and commitments mentioned.
Is the Minister not embarrassed that, as a consequence of the increase in the minimum wage, anyone who works a 40 hour week at €7 an hour earns €280? Those are caught in the PRSI and income tax traps. The Minister has stoutly defended very rich non-residents for tax purposes. He has stoutly defended the reason he will not review residency rules to allow them to exercise fidelity to the State and pay income tax here. Will he not equally review the position of the lowest earners? Those on the minimum wage of approximately €280 a week do not just pay tax, they also pay PRSI. In addition, their medical card is withdrawn — a triple whammy by this mean and miserable Government.
I am pleased with the progress made on taxation since becoming Minister for Finance. The facts are that following budget 2004, 35% of income earners — 668,700 — will be exempt from paying taxation compared to less than 25.5% of income earners — 380,400 — in the 1997-98 tax year. I am equally pleased that in the OECD area and in the international context it has been pointed out that in 2003 Ireland had the lowest tax wedge for a single person on the average industrial wage, that is, income tax levies and employer's and employee's PRSI as a percentage of gross income in the European Union and one of the lowest in the OECD.
For the average industrial worker, married with two children, with a carer in the home, Ireland has the lowest tax wedge in the European Union and perhaps the entire OECD. Recently released OECD data indicated that the tax wedge for such workers was followed most starkly in Ireland than in any other OECD country, reflecting the progress the Government has made in this area. I am absolutely thrilled that the tremendous achievements in this area of taxation have been recognised.
Since the Minister said he had no shame, perhaps we might get him to admit to a small degree of embarrassment. I remind him that he gave back on an annual basis €7,000 to single persons earning €100,000 or more. At the same time, he could not see his way to remove those on the minimum wage from the tax net. How can he justify giving an additional €7,000 per annum to those earning €100,000 or more when he cannot give a relatively small amount to those on the minimum wage? After all, they are at the bottom end of the income scale and surely deserve to be taken from the tax net.
My party introduced the concept of the minimum wage. It was a commitment given in the 1997 Fianna Fáil election manifesto. The concept was brought forward many months prior to that election by this well known right-winger. I made a speech during the winter period that it would be a Fianna Fáil commitment. The then rainbow Government of Fine Gael, the Labour Party and Democratic Left said it could not be done. None of these parties included it in their election manifestos. The concept was introduced by me and Fianna Fáil.
The Minister is taxing the people concerned.
All of the figures, including the analysis done by the ESRI post the last and previous budgets, indicate that the benefits of the taxation changes made during my time as Minister for Finance have assisted those on the lowest incomes more than anyone else.
That is not true.
These are the facts.
The Minister to continue without interruption.
The proof of the pudding is that for those on the average wage, there is a lower tax take by the Exchequer than in any other country in the European Union. It is one of the lowest in the OECD. This has been the success of our taxation policy which is recognised internationally.
The Minister's achievement is that the majority of PAYE taxpayers pay tax at the rate of 42%.
Sorry, Deputy, we have already gone over time on this question.
That is the Minister's achievement and it is nothing to be proud of.
A brief final reply from the Minister.
He has achieved stealth taxes.
I am well aware that at least some journalists are more literate than they are numerate. The figures to which Deputy Burton referred are a statistical abomination.
They are in a report from the Minister's Department.
On that basis, if I were lucky enough, for instance, to leave just 5,000 people in the tax net with more than 1.5 million outside it, with 1,000 of them paying tax at 20% and 4,000 paying at 42%, Deputy Burton and some commentators would state that 80% of taxpayers were paying at the highest rate. The more people I leave out of the tax net, the lower my figures will be. I have seen some of the most ridiculously innumerate commentary in this regard recently. There is a strong case for bringing back the primary certificate and including arithmetic again.
Carbon Tax.
9 Mr. Gogarty asked the Minister for Finance the situation regarding the introduction of a carbon tax. [12959/04]
Amharc ar fhreagra34 Mr. P. Breen asked the Minister for Finance if he is committed to the introduction of a carbon tax in 2005. [12906/04]
Amharc ar fhreagra54 Mr. Sargent asked the Minister for Finance if his attention has been drawn to the fact that growers in the glasshouse sector depending on gas for heating need to discuss the extent to which they avail of CO2 emissions to assist in their produce growing and the need to take this into account before carbon taxes are levied. [9204/04]
Amharc ar fhreagra65 Mr. Penrose asked the Minister for Finance the progress made by his Department in its consideration of the consultation papers on carbon taxes; and if he will make a statement on the matter. [12989/04]
Amharc ar fhreagraI propose to take Questions Nos. 9, 34, 54 and 65 together.
As I stated in my budget speech on 4 December 2002, Ireland has international obligations under the Kyoto Protocol to reduce greenhouse gas emissions. For this reason, the Government asked the relevant Departments to advance the plans for a general carbon energy tax, with a view to introducing it from the end of 2004. I also said that there would be full consultation with interested parties on the design of a carbon energy tax.
In July 2003, I commenced this consultation process and made available a carbon energy tax consultation paper prepared by my Department. This consultation paper was designed to facilitate discussions on the introduction and design of the carbon energy tax while recognising that there are divergent views on the issue. The paper gave a concise overview of the issues relevant to consideration of the proposal. Submissions in response to the paper were invited from interested parties to be received in this Department by 30 September 2003, but extra time was given where requested by organisations to complete their submissions. A total of 117 submissions were received by my Department in response to the carbon taxation consultation paper. As part of the consultation process, these submissions are now also available publicly on my Department's website.
A large proportion of those who made these submissions did not wish to see a carbon tax imposed in the State. A significant number who might agree in principle wanted exclusion or exemptions for themselves. Others raised serious misgivings about the impact of a tax on inflation, competitiveness and the poor.
The current step in this process is the examination of submissions received in my Department. This is being assisted via the green tax group, which is an interdepartmental group chaired by my Department, comprised of relevant Departments with an interest in environmental tax issues.
With regard to the specific question on growers in the glasshouse sector, I am aware that a submission was made on this issue by the IFA horticulture committee and it is currently being examined with all other relevant considerations in the context of the development of the carbon energy tax proposal. It would not be appropriate for me to comment further on this or any other issue at this stage.
This is one of the most important issues facing us in an environmental as well as tax context. When will the Minister give the Government's position on the issue? Do we have to wait until budget day 2004 and have a short, one month gap before it is introduced? I imagine the companies which will be affected by this will need to have advance notice of when it will be introduced and in what form. The Minister stated that we are in extra time in examining the submission, but we are well beyond it, the game is over and the crowd has gone home, yet the Minister is still prevaricating over whether we will introduce carbon taxes.
Does the Minister have full agreement among his Cabinet colleagues on the issue or is there division between him and, for example, the Tánaiste and Minister for Enterprise, Trade and Employment? Has the matter been brought to the Cabinet yet for approval? Has the Minister decided the manner in which revenues from such a tax will be used? Whatever about the plight of the greenhouse growers in Fingal, about whom he seems to be concerned, has the Minister set out a definite policy about how the revenue will be used? Will he give a commitment that the revenues from any such tax will be recycled through lower PRSI contributions, lower VAT rates or higher social welfare payments to offset some of the consequences of the tax on people with low incomes or does he see the revenue being used for general Government spending?
In my budget speech in December 2002, I stated that the Government would consider the introduction of a carbon energy tax by the end of 2004. Consequent to that, we have invited submissions and, as I pointed out, of the 117 submissions, 42 are in favour or could accept the tax, 53, or 45%, are not in favour of the tax, 11 would like their own company or sector to be exempt and 11 did not comment on whether they were in favour.
Is this how we decide policy?
As the Deputy can see from the submissions received, there is a considerable divergence of views on this issue, as there will be among members of all the political parties in the House.
Not among the Green Party, we are fully in favour of it.
Deputy Ryan, I ask you to afford the Minister the same courtesy you received. We cannot have a situation in the House in which Members submit a question to a member of the Government and do not allow the Minister to reply.
The Minister stated that——
It does not matter what the Minister stated, he is entitled to reply to your first question without interruption.
The Deputy raised a number of issues in regard to whether, if there is to be a carbon energy tax, it would go into the general maw of the Government or would be specifically linked to changes in PRSI or specific actions affecting some of the poorer sectors of society. This is a very involved area and the Government will give it further consideration in the coming months.
I am sure the Minister will know Edmund Burke's famous saying: "To tax and to please, no more than to love and be wise, is not given to men." Is the Minister applying this a little too acutely to his situation by continually postponing a decision on this important issue? Will we wait until budget day next year before we hear of the Government's decision or will there be Government proposals in the nature of a White Paper or similar, whereby there can be a reasonable and sensible debate in the House about solid options the Government proposes to implement? We have seen the discussion document and the submissions, but we want to engage at the level of a White Paper.
Is the Minister concerned that the system in place in respect of carbon tax and emissions trading is having the perverse effect that polluting industries have no incentive to conform but rather wait for their next emissions allowances to be issued to them? Does he believe we have a coherent policy in this area to achieve the Kyoto objectives and how does the carbon tax fit in?
If Deputy Bruton is making the point that there is not one simple solution in regard to carbon energy taxes, I agree with him. Some people have taken a very simplistic view of this over the past few years when there is no simple answer. The Government will consider the matter further in the coming months and will decide what to do. The matter has not yet been considered by the Government. The emissions trading issue was decided by the Government in recent months.
I am only asking about the process. Will there be a White Paper and a debate?
I have put no proposals to the Government in that regard. As the Deputy well knows, I am not in a position to tell him what I might put before the Government, but it will consider the matter in the coming months and I will take on board some of the ideas the Deputy has put forward.
In regard to the permit structure of carbon emissions trading, has an evaluation been made of the announcements made by the Minister for the Environment, Heritage and Local Government, Deputy Cullen, in regard to their impact on Irish industry, in particular the structure for new large-scale incoming foreign direct investment, such as Hewlett-Packard or Intel? Those have high, energy requirements and, under the scheme, they may in future have to purchase such permits from older industries in the State, which may be relatively heavy polluters.
I repeat a question I asked the Minister before. Has his Department carried out any further evaluation of the impact of the proposed carbon taxation structure on older people? I refer to the lack of insulation in many old people's homes and the impact on them of increased prices for turf and coal.
The question on emissions trading would be more properly addressed to the Minister for the Environment, Heritage and Local Government, who has dealt with this matter.
I am asking about the financial implications.
When considering the emissions trading issue, the Government considered all these matters. The issues referred to by the Deputy were considered by the Government and, in particular, by the Department of Enterprise, Trade and Employment in its contribution to that debate.
Deputy Burton referred to a carbon energy tax and, if one were to be introduced, the effect it would have on older and poorer people would certainly be examined by the Government. With respect to Deputy Ryan's party, which has campaigned forcefully for a carbon energy tax for several years, all those issues must be considered. This is not a simple issue, as is evidenced by the submissions we received. Even if we had received no submissions, people would come to realise that this is a difficult issue.
I want to ensure the Minister is aware of Green Party position on this. To take the ESRI line, the revenues from a carbon tax should be fully recycled into lower employers' PRSI payments, lower VAT, increased social welfare contributions and a fund for cleaner technology. That is exactly what we will be looking for from the Minister.
The Minister said this is a complex issue, which it is. There is not one solution. Is the Minister's Department beginning to investigate the scientific analysis presented at the Environmental Protection Agency conference last week, that Ireland and other western states will have to examine an 80% reduction in our CO2 emissions in the short to medium term to address the climate change fears of the scientific community? Given the complexity of the issue, how does the Government justify its massive roads expenditure? That will lead to high emissions growth in the transport sector. What role does that expenditure have in terms of energy policy when we have a block on the development of renewable energy sources? If this is a complex issue with multiple and variable responses, what is the Department of Finance's role in the investment and funding decisions we make for a lower-emissions future? Why in God's name are we investing so much in roads when we will have to shut them in 20 years' time because of emissions from the transport involved?
Does the Minister have any proposals for the promotion of alternative energy as another way of reducing our emissions levels?
The original question related to the carbon energy tax. I am conscious of climate change and our obligations under Kyoto. Deputy Ryan is correct if he is putting forward the view that we will have to take some dramatic action in reducing these pollutants. We will have to do that but is a carbon energy tax the way to do so? That will have to be addressed.
Taxation certainly plays a part in preventing people from creating pollution. I accept that. However, as I have pointed out previously, this area is complex because of the other issues it raises, which leads me to Deputy Burton's supplementary question. There may be other incentivising steps we could take to achieve what she suggested, but this question related to a carbon energy tax.
Written Answers follow Adjournment Debate.
