Derek McDowell (Labour)

I move recommendation No. 3:

In page 13, before section 1, to insert the following new section:

1.–In respect of the year of assessment 2003 and subsequent years of assessment, section 461 of the Principal Act is amended by substituting '€2,000' for '€1,250'.".

I did not move recommendations Nos. 1 and 2 because the intended effect of all four recommendations is to remove the minimum wage from the income tax net. The first two recommendations, duplicates of amendments that appeared on the Dáil Order Paper on Report Stage, propose to achieve this by way of extending the exemption limits. I am not disposed to that approach and the Minister will be aware of my views. I have opted for a different approach, set out in recommendations Nos. 3 and 4, which would increase personal tax credits for single and married persons.

For some time I have taken the view that income tax was reduced too quickly and in the wrong way. As I have debated this on numerous occasions with the Minister, I see little point in detaining the House by rehearsing the argument. However, both he and I agree that, in principle, a way should be found to remove the minimum wage from the income tax net.

The minimum wage is €6.70 per hour. Assuming the new partnership programme, Sustaining Progress, is passed and agreed, it will increase to €7 per hour next year. This will mean that the percentage of the minimum wage exempt from the tax net will fall from its current level of approximately 90% to under 80% by the end of next year.