Charlie McCreevy (Kildare North, Fianna Fail)

I thank all Senators who contributed to the debate. By way of a general comment, I point out to the House that the budget and its implementation, including the Estimates and tax provisions in the Finance Bill, are part of a strategic approach to our economic development. I agree with Senator McDowell that the economy has shown itself to be resilient and sturdy.

Senator Coghlan mentioned that we currently have the privilege of holding the Presidency of the Council of Ministers. For some time now, the policies advocated at the Economic and Finance Council and by the European Commission consist of lowering the tax burden on labour and capital to stimulate the EU economy and keeping down the ratio of public spending to GDP so that Europe may regain competitiveness. These policy prescriptions are shared by the right and the left in Europe and are already being followed to a large extent by the Government. I assure Members that Ireland's economic situation is the envy of many other states in the Union and has been widely praised by all the main and reputable economic commentators.

I now turn to the income tax changes in budget 2004. I reject any criticism that the Government has failed to index credits and bands. Senator Browne referred to stealth taxes and highlighted the non-indexation of tax credits in this sector. I dismiss the notion of stealth taxes. The measures to implement Government income tax policies are laid before Dáil Éireann in the Finance Bill and are debated openly. There is no stealth involved. All PAYE workers benefited from the income tax changes in budget 2004. However, the resources available were focused on the lower paid and the elderly, providing significant increases in PAYE credits and exemption limits for the elderly. This approach ensures that 90% of the minimum wage, annualised, is maintained free of tax and that the real value of income for pensioners on low incomes is protected. It is fully in line with the commitments contained in An Agreed Programme for Government and Sustaining Progress.

The increase in the PAYE credit means that in 2004, for a single PAYE worker, the first €12,000 per annum or €246 per week of earnings will be tax free. For a married one-earner with a carer in the home, the first €24,250 per annum or €466 per week will be free of tax. I remind Senators that in 2004, 35% of all income earners will now be entirely outside the tax net.

Senator Browne referred to more than half of all PAYE taxpayers paying tax at the higher rate in 2004, suggesting that the Government had abandoned its policy of having 18% of income earners pay tax at no more than the standard rate. To talk about half of all PAYE taxpayers paying tax at the higher rate this year gives the wrong impression. If one talks about taxpayers rather than income earners, perversely the more people we exempt from tax, the higher the percentage of taxpayers at the top rate, even if there is no increase in the numbers. There is nothing incorrect in shifting the basis for comparison. This became necessary once we moved to tax allowances or tax credits. Some commentators are not comparing like with like. Under the allowance system, a person does not enter the top rate band until allowances are used up but under the tax credit system, which currently applies, the bands apply from the first euro with credit deducted afterwards.

I also draw the Senators' attention to the real reduction in the tax burden for those on average incomes. May I remind Senators that since 1997, the average tax rate for a single worker on the average industrial wage has dropped by ten percentage points from 27% to 17%. In addition, it is expected that in 2004, those earning at or under the average industrial wage will contribute approximately 6% of the total tax take; the equivalent in 1997 was 14%.

I wish to mention international comparisons. The tax wedge, which in simple terms is the difference between what the worker receives into his or her hand and the total payroll cost to the employer of hiring that worker, is crucial from an employment point of view. For the average production worker who is married with a carer in the home, Ireland now has the lowest tax wedge in the European Union and the OECD. Furthermore, recently released OECD data show that the tax wedge for workers has fallen more sharply in Ireland than in any other OECD country, reflecting the progress the Government has made in this area.

Senator Browne referred to housing and the position of first-time buyers in regard to stamp duty. The Government considers that one of the main objectives of housing policy is to increase supply and we have been phenomenally successful in achieving this. Last year, almost 70,000 new housing units were constructed which is a record and per head of population must be the highest ratio in the European Union.