Dáil Éireann Debate, Wednesday - 27 April 2005
101 Ms McManus asked the Minister for Finance when the Government expects to honour the commitment given in An Agreed Programme for Government that 80% of all earners would pay tax only at the standard rate, especially in view of the fact that the proportion of taxpayers paying at the higher rate is expected to increase from 32.61% in 2004 to 33.17% in 2005; and if he will make a statement on the matter. [13349/05]
Amharc ar fhreagraThe Government programme, An Agreed Programme for Government, states that "over the next five years our priorities . . . will be . . . to ensure that 80% of all earners pay tax only at the standard rate". The five year period mentioned commenced three years ago when the Government was elected to office. However, the commitment is given in the context of a broader economic and budgetary strategy which provides, among other things, that the public finances will be kept in a healthy condition and that personal and business taxes will be kept down to strengthen and maintain the competitive position of the Irish economy.
The position is that had the standard rate bands not been widened to the extent that they were in budget 2005, 35.9% of income earners would have been paying tax at the higher rate in 2005. The effect of the budget was to reduce the proportion to 33.2%. Further progress in this area 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.
Since 1997, average tax rates have fallen for all categories of taxpayer, for example, the average tax rate, that is, income tax, PRSI and health levy combined, for the person on the average industrial wage has reduced by over ten percentage points from over 27.6% in 1997 to less than 17% in 2005. Also, it is estimated that in 2005 the proportion of the income tax yield coming from those earning at or under the average industrial wage is projected to be about 5.9%. The equivalent figure in 1997 was over 14%.
In an international context, the most recent data from OECD relating to the year 2004 indicate that, once again, Ireland has the lowest tax wedge, that is, income tax plus employee and employer PRSI as a proportion of gross wages plus employer's PRSI, in the EU and one of the lowest in the entire OECD. Furthermore, the personal average tax rate of the average production worker dropped in Ireland between 2003 and 2004, despite an increase in wages. Meanwhile, the average tax rate rose or remained the same in about 20 of the other 29 countries surveyed.
For the single worker on the average production wage in Ireland, the average tax rate is the third lowest after Korea and Mexico of the 30 countries studied. It is the lowest of the 19 EU member states surveyed. A married one earner couple with two children on the average production wage in Ireland in 2004 in fact receives more money in cash transfers from the State than they pay out in income tax and social security contributions. Only Luxembourg is in the same league as Ireland in this respect and the OECD figures do not take account of the further improvements made in budget 2005.
