Joan Burton (Dublin West, Labour)
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Question 46: To ask the Minister for Finance his views on the recent report from the Revenue Commissioners on the effective tax rates of the top 400 earners for the tax year 2001; his further views on whether it is appropriate that such high earners should be able to minimise and in some cases eliminate tax liability; the steps he is taking to address this situation; and if he will make a statement on the matter. [13466/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The recent Revenue Commissioners' report on the effective tax rates of the top 400 earners, which covers the short tax year 2001, indicates that between the years 1999-2000 and 2001, the number of high earning taxpayers with an effective tax rate of less than 15% decreased by 3.75%, while those with an effective tax rate between 15% and 29% increased by 3.25%.

This upward movement in effective rates indicates that measures such as the capping of capital allowances available to passive investors continued to take hold. The increase in effective rates took place despite the 4% reduction in the standard and top income tax rates, from 24% to 20% and from 46% to 42%, respectively, during that period.

Despite the increase in the effective tax rate for many high earners, some continued to reduce their tax bill to zero. This, however, is not a new phenomenon as all of the previous tax years examined by the Revenue Commissioners, starting with the tax year 1993-94, indicated that a number of individuals had recorded a zero rate.

As the Deputy will be aware, in budget 2005, I announced that my Department, in conjunction with the Revenue Commissioners, would this year undertake a detailed review of certain tax incentive schemes and tax exemptions. This review is under way and the information contained in the latest report of the Revenue Commissioners will provide a valuable input to that important policy review. Until the review is complete and I have considered the matter, I do not propose to make any comment on what steps I may take in this area.

Joan Burton (Dublin West, Labour)
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Is the Minister aware that the study highlights the fact that the top 115 earners each received an average of €500,000 in tax breaks per year? I am not sure if the Minister gambles but that figure is equivalent to a small national lottery win — guaranteed and risk-free, if one uses certain tax breaks. The statistics show that 29 of the country's top 400 earners in the country paid no tax. The Minister will recall stating in a previous reply that 41 people, single and married, with incomes of over €500,000 per year paid no tax.

When will the free ride for these people end? Does the Minister propose to merely postpone taking action? The Taoiseach, in particular, and the Tanáiste have both stated that they find it morally unacceptable — they may also find it economically unacceptable — that certain individuals who earn extraordinary amounts of money can avoid paying tax. Most of the people to whom I refer avoid paying tax by availing of the property-based tax breaks introduced by the Minister's predecessor.

Why, in respect of the study, did the Minister propose to abolish the provision of information regarding individuals who do not pay tax in the future? The response of the Government to the embarrassment caused by those on high incomes who pay no tax is to quarantine the information. The study proposes a new methodology where there will be no class of people recorded as paying zero tax. The information in the future will refer only to those paying under 5%. If these people pay DIRT, it will qualify them as paying tax.

I am a chartered accountant by profession and if I was advising any of these lucky lotto winners, I would suggest that they invest €1,000 or €10,000 in their favourite local bank, pay a small amount in DIRT and thereby remove themselves from the category of those who do not pay tax. Why is the Minister proposing to block the release of the information in question when, as he stated in his reply, he is deferring taking any action in respect of eliminating the scandalous situation involving very wealthy people who, mainly because they benefit from the property-based tax breaks introduced by the Minister's predecessor, do not pay tax?

Brian Cowen (Laois-Offaly, Fianna Fail)
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I am never surprised by Deputy Burton's ability to concoct a conspiracy where none exists. I had no say regarding the methodology used in respect of this study. It was the sole preserve of the Revenue Commissioners, who are independent. Deputy Burton should desist from imputing a dishonourable motive on my part because it detracts from her argument.

Regarding the issue of deposit interest retention tax raised by Deputy Burton, the Revenue Commissioners have advised me, in respect of their recent report on effective tax rates of high earners, that for the small number of taxpayers whose income consists of very large sums of deposit interest, the amount of DIRT deducted means that their effective rate of income tax paid was very close to the 20% standard rate at which DIRT is deducted from deposit interest. This is because DIRT deducted at the standard rate is a final tax. The taxpayer has no further liability to income tax on the deposit interest concerned. Like similar taxes, deposit interest retention tax is a form of income tax. As far as the Revenue Commissioners are concerned it is, therefore, appropriate to include it in such studies on tax paid by those on high incomes. The fact that this was not done in the past was an oversight which is now being corrected.

The idea that the change in methodology will not show the numbers of people with a 0% effective rate of tax is not correct. Essentially, the change being made is about accuracy of information and ensuring that taxpayers are correctly categorised into the different bands of effective rates. Future studies will show high earners who have a 0% effective rate of tax.

The recent study makes it clear that, with regard to the proposed new methodology for future studies, "individuals paying some tax, although amounting to an effective rate of 1%, will be excluded from the 0% range and included in the less than 5% range". To facilitate comparisons, tables 3A, 3B and 4 in annex 1 recast tables 1A, 1B and 2, respectively, to show the numbers and percentages on the basis of the methodology that will be used in future. Table 4 in annex 1 of the study shows that the number of high earners with a 0% rate effective rate, if any, will be identified in future studies as they have been in this most recent study. In future, those who pay no tax at all will be in the 0% category, those paying some tax but less than 5% will be included in the greater than 0% and less than 5% category.

Regarding other aspects of Deputy Burton's question, we are talking about the use of tax incentives and reliefs introduced by successive Governments for the purpose of economic and social development. We need to achieve a balance in the budget between incentivising economic and social development and ensuring that everyone pays his or her fair share. This was not done during the tenure of the rainbow coalition. This Government has closed down a range of schemes introduced by the rainbow coalition.

The measures and schemes to which I refer include: the designated seaside resort scheme, which was introduced in 1995 — I wonder who was Minister for Finance at that stage; the Customs House docks area scheme introduced in 1985 — I do not believe there was a Fianna Fáil Minister for Finance then; the designated islands scheme introduced in 1996 — I believe a Labour Minister for Finance was in office at that time; a double rent relief element in respect of the various tax designated area schemes introduced under the original urban renewal scheme of 1985; and foreign earnings income tax relief, which was introduced in 1994. I cite these examples in respect of bringing a measure of balance and accuracy to the debate.

Joan Burton (Dublin West, Labour)
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I have a supplementary question.

Séamus Pattison (Carlow-Kilkenny, Labour)
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We have exceeded the time limit for this question. Deputy Burton must be brief.

Joan Burton (Dublin West, Labour)
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Is the Minister willing to review the recommendation whereby the giving of the information regarding 0% taxpayers will effectively be abolished? He acknowledged this in his answer but he did not answer my question.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I have explained the situation regarding the Revenue Commissioners. The reasons for doing so were correcting oversights in the past and ensuring accuracy of information. Those who pay no tax will be in the 0% category.

Joan Burton (Dublin West, Labour)
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The Minister is closing down information.

Brian Cowen (Laois-Offaly, Fianna Fail)
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If the Deputy wishes to suggest any impropriety, she should refer it to the Revenue Commissioners and not to me.