Mary Upton (Dublin South Central, Labour)
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Question 269: To ask the Minister for Finance his views that the employee tax credit be incorporated into the personal tax credit system for all taxpayers in view of the response to Parliamentary Question No. 326 of 28 March 2006; and if he will make a statement on the matter. [19473/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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It is assumed that what the Deputy means is that the employee (PAYE) tax credit would be abolished and the personal tax credit would be correspondingly increased by €1,490 for a single person and by €2,980 for a married couple.

The position is that the PAYE allowance, as it was then, was introduced in 1980 to improve the tax position of PAYE taxpayers and to take account of the fact that the self-employed generally then had the advantage of paying tax on a preceding year basis. The argument was also made at the time that the general scheme of allowances discriminated against employees and in favour of other taxpayers.

There have been changes since 1980; the self-employed now pay tax on a current year basis, for example. However, the PAYE allowance has become a tax credit. Moreover, given that there can be significant timing advantages in the payment of tax for the self-employed, the employee credit is still perceived as necessary to ensure a balance in the system.

I do not believe that the provisions of the European Convention on the Social Protection of Farmers, which was agreed in 1977 and has not been signed or ratified by any Irish Government, would have any implications for the employee tax credit.