The Deputy will be aware of the commitment contained in the Government Programme to keep down personal and business taxes in order to strengthen and maintain the competitive position of the Irish economy. When this Government came to office in 1997, the rates of business and personal taxes were still high compared with today's rates. The standard corporation tax rate was 36% and income tax rates were 26% and 48%, respectively. Over the last eight years, corporation tax has been reduced to a standard 12.5% and the income tax rates reduced to 20% and 41%, respectively.
A lower direct tax regime combined with reducing the public debt burden is more conducive to social and economic progress than policies which would give rise to high taxation and high levels of public spending. In this regard, Ireland offers one of the most enterprise-led corporate tax environments in the world. The 12½% corporation tax rate continues to support the necessary stable enterprise environment which the Government have sought to develop over the last number of years. This has been one of the main elements in the attraction and development of top quality investment in Ireland.
Since this Government came to office in 1997, the system of personal tax allowances has been replaced with a more equitable system of personal tax credits, the value of the basic personal tax credits has increased significantly, the higher and standard rates of tax have been reduced from 48% to 41% in the case of the higher rate and from 26% to 20% in the case of the standard rate and the standard rate band has been widened considerably for all categories of taxpayer (single, married one-earner and married two-earner). The single and married two-earner bands have increased by over 170% in the period while the married one-earner band has increased by 71%.
Arising from these structural changes to the income tax system, the position is that: average tax rates have fallen for all categories of taxpayer since 1997; for 2007, the single employee earning the minimum wage will pay no tax on his or her earnings (in addition, as a result of changes in the PRSI system, the person has no liability for PRSI so that he or she keeps 100% of his or her earnings); the person earning the average industrial wage in 2007 will not face a liability for higher rate tax; 80% of income earners will pay no more that 20% tax on their incomes in 2007; in international terms, for the single worker on average earnings, the latest OECD data relating to the year 2005 indicate that Ireland has the lowest tax wedge in the EU. This has been the case in each of the six years 2000 to 2005. We also have one of the lowest tax wedges in the entire OECD; for a married one-earner couple with two children on average earnings, Ireland has the lowest tax wedge in the entire OECD. In addition, when cash transfers from the State are taken into account, such couples face a negative burden in Ireland because they receive more in the cash transfers than they pay out in tax and social security contributions. Ireland is the only OECD country where this is the case.
I am in no doubt that the low direct tax policies pursued by the Government over the last 10 years have been remarkably successful in developing enterprise and jobs and in encouraging labour market participation.