Kathleen Lynch (Cork North Central, Labour)
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Question 143: To ask the Minister for Finance the estimated cost to the Exchequer in 2007 of the 1% cut in the top rate of tax in Budget 2007; and the percentage of earners paying tax at the top rate. [3894/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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As outlined in my 2007 Budget speech, the estimated net cost of the 1% cut in the higher rate of tax is €125 million in 2007 and €186 million in a full year. These cost estimates take account of the estimated off-setting savings in the costs of marginal rated tax reliefs arising from the reduction in the rate.

As regards the second part of the Deputy's question, if one looks at the effective tax rates actually paid by taxpayers, there are many who are nominally liable at the higher rate of tax but who effectively pay tax at no more than the standard rate of tax. This is due to their higher rate liability for tax being fully offset by the value of their personal credits, as explained in pages C23 to C28 of the 2007 Budget booklet. It is estimated that, allowing for this effect, an estimated 19.8% of income earners will pay tax at a rate of greater than 20% in 2007. These earners will pay 41% at the margin, but for most of them, their effective income tax bill will be well below 41% because of the operation of their tax credits and standard rate bands.