Michael McDowell (Dublin South East, Progressive Democrats)

Capital gains tax is now 20% and yet the State's yield from capital taxation has exploded from £168 million in the glorious days of the rainbow coalition to a budgeted €2.025 billion next year. Lower rates have again produced higher yields. I remember a Labour Party spokesman describing the plan of the former Minister, Mr. McCreevy, to reduce the rate of capital gains tax from 40% to 20% as a fiscal obscenity. Let him look at the figures now.

The same picture emerges when we look at corporation tax. Since 1995, the standard rate of corporation tax has been reduced to 12.5%. Let us see what has happened since 1995. Proceeds from corporation tax have jumped from £2 billion to a budgeted €6 billion in 2006. Lower tax in this case yet again produced higher yields.

It is interesting to look at what has happened in the Irish taxation system. Since the mid-1990s the balance of the Irish taxation system has changed with the State collecting more of its total tax take from corporation and capital taxes. Curiously, once we got the left out of power, corporation and capital taxes went up as a proportion of tax receipts. Therefore, we need to collect less from income tax and value added tax. The share of the total tax take from corporation and capital gains tax together has risen from 14% of the total tax rate under the rainbow coalition to 26% now. There has been a corresponding reduction in the share contributed by income tax and value added tax from 86% under the left dominated rainbow coalition to 74% now.

The benefits of our policies for ordinary working people can be illustrated looking at the income tax burden as it falls on a single person earning the average industrial wage. In 1997, a year when the economy was in great nick we are told, a person on the average industrial wage paid 28% income tax, more than a quarter of his or her income. By 2006, that will have fallen to just 16%. The reduction in the amount of tax taken from their wages has contributed to growing numbers of people wishing to work, as the Deputies opposite point out, and being able to find work, which is more important. Between 1997 and 2005, the total number of people working in the economy has grown from 1.5 million to 2 million.

The message from my party and our partners in Government is simple — lower rates produce higher yields and more jobs. Higher yields also provide for more spending. The Government has reduced tax rates and enjoyed rising tax yields. These increased tax revenues have allowed significant and generous increases in State spending. In 1997, net resources available to the Department of Health and Children under the rainbow coalition were £3.3 billion. Next year, that Department will have resources of €9.6 billion. Spending in that Department is up over 200% since 1997. The story is similar in other Departments. Resources for education are up 135% since 1997 and resources in the Department of Social and Family Affairs have more than doubled.

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