Pat Carey (Dublin North West, Fianna Fail)

There are step effects in our current taxation system which have been in place for a number of years. For example there is a step in the current health levy and the PRSI system. There is no compelling evidence that these step effects have discouraged workers from accepting increases in pay. There is precedence for the current income levy structure. The income levy introduced by the Fianna Fáil-Labour Government in 1993 had a step effect, as did the income levy introduced by the Fine Gael-Labour Government in the early 1980s. The health levy is exempt for those earning less than €500 per week or €26,000 per annum. Once a person goes above this threshold he or she will pay the levy on all income, including the first €26,000.

In the PRSI system there is an exemption limit of €352 per week or €18,304 per annum. Once a person goes above this threshold he or she will pay 4% PRSI on all income except the first €127. With the income levy, once a person goes above the €18,304 limit he or she will pay 1% on all his or her income. For a person whose income increases by €1 per week over the threshold they will pay an extra €3.50 per week. This demonstrates that the step effect in the income levy is smaller than the steps in the health levy or the PRSI system.

This levy will aid in the restoration of order and stability in the public finances and will enable Ireland to return as soon as possible to a natural level of economic growth. Economic growth and the provision of high-quality public services are essential in a modern economy. This measure is forward-looking and will have a positive impact on the future. The Minister has said in the Dáil that the Commission on Taxation may consider these issues.