Paul McGrath (Westmeath, Fine Gael)

The Minister said in his response to these amendments that it is a question of the issues. Is the real issue not that his predecessor froze the level of personal tax credit and PAYE allowance and, as a result, pushed people with their normal increases who were near €28,000 in earnings into the top rate of tax? They pay the surplus at 42% and, hence, there has been an increase in the number paying tax at the top rate. If that had been index linked, with wage increases running slightly ahead of inflation, they would not pay tax at the top rate.

The Minister has increased the 20% threshold by €1,400. That is welcome and keeps pace with inflation for this year, but for two or three years it did not happen. The write-off for the taxpayer should at least keep pace with inflation in terms of allowances and tax credits. It should not be the case that for any increase people get in their wages or the overtime they do they pay tax at the top rate. Those affected are at the margins of living reasonably well. If someone earning €28,000 can get some overtime and is charged 42%, it lessens the incentive to do that overtime. If he was, however, below the threshold and indexation was in place, it would keep him within those limits and make it more attractive.

The Minister says that in the long term, with the low taxation he is talking about, there will be greater incentive for people to earn more and give the Exchequer more. We should move towards a system of indexation where people know from year to year that their credits will be increased.

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