Joe Costello (Dublin Central, Labour)
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Question 142: To ask the Minister for Social and Family Affairs if his attention has been drawn to the recent study from the Combat Poverty Agency which shows that the increasing levels of indirect taxation here are having a disproportionate effect on persons on lower incomes; the efforts he is making to ensure that those on low incomes receive sufficient supports to deflect the impact of these indirect taxes; and if he will make a statement on the matter. [31728/06]

Séamus Brennan (Dublin South, Fianna Fail)
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Earlier this year, I welcomed the publication by the Combat Poverty Agency of its report "The Distributional Impact of Ireland's Indirect Tax System" and the associated policy statement "Promoting Equity in Ireland's Tax System".

The report addressed whether and to what extent the Irish system of indirect taxation, namely VAT and excise duties, is regressive. The report outlines that over the period 2000 to 2005, the share of total Current Exchequer Revenues represented by VAT and excises duties combined has remained unchanged at 44.5%. The authors concluded that the indirect tax system appears to be regressive in the sense that households in the lowest decile pay a higher proportion of their income in indirect taxes relative to households in the higher deciles. However, they also noted that the indirect tax system includes some elements of progressivity such as low tax rates on food and fuel and zero tax rates on children's clothes and footwear. They also pointed out that changes to some tax elements could have negative effects elsewhere. For example, lowering taxes on drink and tobacco could have a negative health impact.

In conclusion, the authors do not recommend adjustments to indirect taxes.

This Government has greatly increased the levels of income support provided through the social welfare system and remains committed to improving the standard of living of welfare dependent and low-income households. Since 1997, the lowest rates of welfare payments have increased by almost 100%, well ahead of the 49% accumulated inflation over that period.

In the last Budget, the personal and qualified adult rates of payment were increased by unprecedented amounts. The lowest rates of social welfare payments were i increased by €17 per week to €165.80, or by 11.4%. This increase is well ahead of projected inflation for 2006 and, therefore, improves and enhances the living standards of all recipients.

The Combat Poverty Agency report also highlights the need to make work pay for low earners. This has been an important focus of Government policy and I introduced a number of important measures designed to address poverty and to reward work and enterprise in Budget 2006. These included a Child and Family Poverty package of nearly €155 million which involved major improvements for low-income families and for single parent families.

I also introduced a wide-ranging employment support package of €28 million. This contained a range of measures which will alleviate poverty and support activation by improving income disregards and tapers for people with disabilities, the unemployed and qualified adults. These arrangements maximise the benefits of work for low-income households.

I look forward to considering further improvements in income support and allied measures designed to assist low income households in the context of the forthcoming Budget.