Dan Boyle (Cork South Central, Green Party)
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Question 29: To ask the Minister for Finance if and the way in which arrangements will be changed for taxpayers who overpay tax. [2586/05]

Olwyn Enright (Laois-Offaly, Fine Gael)
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Question 47: To ask the Minister for Finance if he has satisfied himself with the provisions for dealing with overpayment of taxation; and if he will make a statement on the matter. [2531/05]

Joan Burton (Dublin West, Labour)
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Question 79: To ask the Minister for Finance the steps being taken by the Revenue Commissioners to determine the exact amount of any overpayment by PAYE workers; the procedures being put in place to ensure repayment of any such amounts; the steps which are planned to alert taxpayers that they may have overpaid; and if he will make a statement on the matter. [2463/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I propose to take Questions Nos. 29, 47 and 79 together.

I am taking it that the questions relate to overpayments by PAYE taxpayers. The Irish PAYE system, which has worked well for almost 45 years now, is a cumulative deduction system which is designed to ensure, as far as possible, that an end of year return or adjustment is unnecessary in the vast majority of PAYE cases provided that all due credits and allowances are reflected in the employee's tax credit certificate and that any non-PAYE income has been coded in to the certificate. Where all due credits or allowances have not been given during the tax year, it is reasonable to expect the employee will look for a balancing statement after the end of the tax year. In the case of some reliefs, medical expenses would be a case in point, it may be appropriate to wait until after the end of the year to claim a tax rebate.

I am advised by the Revenue Commissioners that they have no reason to doubt that the vast majority of PAYE workers receive their full entitlements each year. These entitlements are, in the first instance, reflected in the tax credit certificates issued at the beginning of each year. Revenue is in the process of issuing over 2 million certificates to PAYE taxpayers for the 2005 tax year. These certificates reflect the most up to date information Revenue has on an individual and they are accompanied by a leaflet giving details of the credits-reliefs to which taxpayers may be entitled. Where circumstances change in the middle of the tax year, for example, a marriage or a change of job, the employee will normally contact Revenue and arrange for a new tax credit certificate to issue.

Some PAYE taxpayers wait until after the end of the tax year to claim due allowances or credits, or to return non-PAYE income, or simply to make sure that there has been no underpayment or overpayment of PAYE tax. For the 2003 tax year, the latest year for which such figures are available, 287,258 PAYE taxpayers, representing 17% of the total PAYE taxpayer base of 1.6 million for that year, have so far made claims or requested reviews of their tax position. Of these reviews, 8% indicated underpayments, 17% resulted in no change and 75% resulted in repayments being made. In money terms, €185 million has been repaid in respect of claims already received and processed for 2003 and, on the basis of experience of late claims in previous years, this figure could be expected to eventually rise to an estimated €306 million when all future returns-claims for the 2003 tax year have been submitted. These figures should be seen in the context of the total PAYE revenue of €7.2 billion in 2003.

It is not possible or reasonable to extrapolate from the above figures to derive estimates of overpayments or underpayment for the full PAYE population because claims or requests for review are, by definition, much more likely to come from those who know they have entitlements to reliefs, for example, for medical expenses, for which they have not already claimed in the first place.

The tax code at present provides that no repayment can be made in the absence of a valid claim or return by the taxpayer. Without such a claim or return Revenue may not have the full picture to determine entitlement to a rebate. For example, taxable payments from the Department of Social and Family Affairs or dividend income may not have been coded in to the tax credit certificate, or the taxpayer may have been self-employed for part of the year.

Revenue is engaged in a comprehensive modernisation of its PAYE computer system, which will include the ability to make amendments and claims over the Internet and much closer computer links with the Department of Social and Family Affairs. When the roll-out of the new system commences later this year, it will provide a greatly improved level of service for PAYE taxpayers, including, subject to defined parameters, a facility for automated reviews of liability where Revenue is satisfied that the figures are correct. The Finance Bill, which will be published on Thursday, will include provisions to underpin this new service.

Joe Costello (Dublin Central, Labour)
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Question 30: To ask the Minister for Finance the number of persons who paid income tax at the higher rate during 2004; the number that will pay at this rate during 2005, following the changes announced in budget 2005; the proportion of those paying tax which this figure represents for each year; his views on whether it is satisfactory that such a high proportion of persons are paying at the higher rate; and if he will make a statement on the matter. [2466/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The information sought by the Deputy is set out in the higher rate column in the table below.

Explanations for the four rows in the table are as follows: row A — distribution of income earners for 2004 as estimated at the time of budget 2004 taking account of the 2004 budget income tax changes; row B — distribution of income earners for 2004 as revised to take account of the latest base year information relating to the short tax "year" 2001 which became available during 2004; row C — distribution of income earners for 2005 before any income tax changes were applied; and row D— distribution of income earners for 2005 taking account of the estimated impact of budget 2005 income tax changes.

It will be noted from the table that the effect of budget 2005 has been to reduce the percentage of income earners estimated to be paying tax at the higher rate in 2005 from almost 36%, in the absence of the budget 2005 income tax measures, to about 33% when those measures are taken into account. It will also be noted from the table that budget 2005 has removed 66,000 cases from the tax net who would otherwise pay tax in 2005.

The major portion of available resources in budget 2005 was devoted to achieving the Government's key aim of taking the minimum wage out of the tax net. The remaining resources were used to widen the standard rate bands, thus ensuring that an additional 52,000 taxpayers will not pay tax at the higher rate in 2005.

Apart from band widening, all income earners benefited from the increases in the personal and employee PAYE credits and that while the proportion on the top rate increased, there was a reduction in their average tax rate, that is, tax as a percentage of income.