Róisín Shortall (Dublin North West, Labour)

As public representatives, we must remind ourselves annually of the different aspects of the tax credit system. This publication is worthwhile, well explained and well illustrated, and I congratulate those involved in producing it.

However, I draw attention to the reproduction of the tax credit certificate in the publication. There is a note to taxpayers which states that this section lists the yearly tax credits one now gets, that the amount of tax credit one pays is reduced by the amount of each tax credit and that tax credits are worth money to one and that one should make sure to claim if they are due. It is important to try to get across the message that people need to claim their due tax credits. However, tax credits are not necessarily worth money to everybody and that is the problem.

It is about a decade since the then Minister for Finance, Charlie McCreevy, signalled his intention to introduce a tax credit system. He was very much praised for that move at the time. We all looked forward to the introduction of a tax credit system and the development of that as the years went on but, unfortunately, we have not seen that kind of development. We are still at the very early stages of the introduction of a tax credit system.

I very much regret that the Minister has not availed of the opportunity to expand that system because it has much potential in terms of providing flexibility and a very effective instrument to the Minister of the day to achieve certain things through the tax net, particularly in regard to the redistribution of wealth.

The move to calculate income tax on a tax credit basis instead of a tax allowance one has made very little appreciable difference to most workers. The standard rating of some tax credits could have been managed under the old system. It seems the Government has changed the method of calculating income tax rather than changing the calculation itself. Without applying all tax credits on a refundable basis, the move to tax credits has been largely meaningless. Without a refundable tax credit system, people outside the tax net, typically those on low wages or in part-time, seasonal or term-time work, lose out on every euro in tax relief available to those inside the tax net.

Taking minimum wage earners and low paid workers out of the tax net is obviously very welcome but it is not enough. Figures published recently show that 30% of all households at risk of poverty are headed by a person in a job. What that indicates is the move towards a low income economy, which has occurred in recent years, and the fact that all of us as public representatives are increasingly coming across families where the head of the household is working but simply cannot make ends meet because the wages are so low. Agencies, such as the St. Vincent de Paul Society, have drawn attention to this problem on numerous occasions. The working poor undoubtedly need and deserve State assistance. The absence of a fully refundable tax credit system is preventing that. If we were to move towards refundable tax credits, it would be possible to target those people and families, in particular, who are most in need.

The Minister boasted recently about the fact that almost two out of every five workers are now outside the tax net. That is very welcome but it means that for the almost 40% of the working population, improvements in the budget, whether in the level of tax credits or any new tax credits, are of no benefit to them. Families on low incomes outside the tax net have not benefited from recent budgets. The only way to tackle this issue is to move towards a system of fully refundable tax credits.

There has been a small amount of movement on tax relief on mortgage interest and on medical insurance costs. Those credits are now refundable, which is welcome, but what about all the other credits?

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