Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Question 84: To ask the Minister for Finance his views on whether the high proportion of Government revenue which is raised through VAT, places an unfair burden on low income families; and if he will carry out a review of the impact of VAT on low income families. [24832/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I reject the Deputy's suggestion that VAT places an unfair burden on low income families. A simple look at the facts will show that as far as EU law will permit, every effort is made to reduce the incidence of VAT and Excise on low incomes.

Firstly, there is no VAT on the main low income items such as food, oral medicines, childrens' shoes and clothing. Secondly, there are special reliefs in the VAT system for medical and other equipment for the disabled. There is no VAT on public transport and diesel used in buses and trains is subject to reduced rates of excise. Most public services are not liable to VAT.

Furthermore, we are not relying more on indirect taxation now than in the past, as the following table will show.

As the Deputy can see, we are, in fact relying far less on indirect taxation, including VAT and Excise, than before, with the gap being made up by greater revenue yield from company tax and taxes on capital and property.

Indeed, as stated above, every effort is made, as far as EU law will permit, to reduce the incidence of VAT and Excise on low incomes, but, by their nature, such taxes are not direct taxes on income (this is why they are called indirect taxes) and cannot be easily related to one's ability to pay, however good one's intent.