Ruairi Quinn (Dublin South East, Labour)
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Question 236: To ask the Minister for Finance the cost to the Exchequer of reducing the standard rate of income tax from 20% to 18%, reducing the marginal rate from 41% to 40%, increasing tax credits and tax bands in line with wage inflation and doubling the credit where one spouse works in the home to care for children, the elderly or the disabled. [12388/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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By reference to the 2007 post-Budget income tax ready reckoner prepared by the Revenue Commissioners, the full year costs to the Exchequer of the Deputy's measures are as follows. Reduction in the standard rate of tax from 20% to 18% is estimated at €1,025 million. Reduction in the marginal, that is, higher rate of tax from 41% to 40% is estimated at €210 million. Increasing the home carer credit from €770 to €1,540 is estimated at €60 million.

In the absence of a specific figure being provided by the Deputy for wage inflation, it is not possible to provide an estimate of the cost of increasing tax credits and tax bands in line with wages inflation. In order to avoid setting a headline, as a general rule, my Department does not publish forecast estimates of wages growth.

However, using the data in the income tax ready reckoner, each 1% increase in the value of the main personal credits (basic personal credit and employee credit) and the tax bands would cost about €120 million in a full year. If the Deputy wishes to estimate costs for future years, he could apply this indicative figure to the pay increases set out in Towards 2016 or to forecasts for wages growth published by the European Commission in its Autumn 2006 Economic Forecast or the Quarterly Economic Commentary published by the ESRI in March 2007.

The costs quoted are provisional, subject to revision and estimated to the nearest €5 million. The ready reckoner is available on my Department's website, at www.finance.gov.ie.