James Bannon (Longford-Westmeath, Fine Gael)
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Question 110: To ask the Tánaiste and Minister for Finance if he will discontinue the discriminatory treatment of farmers and other self-employed sole traders in relation to personal tax credits, particularly as the self-employed are taxed on a current year basis; and if he will make a statement on the matter. [28268/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The position is that the PAYE allowance, as it was then, was introduced in 1980 to improve the tax progression 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 for expenses discriminated against employees and in favour of other taxpayers.

There have been changes since 1980 for example, as mentioned by the Deputy in his question, the self-employed now pay tax on a current year basis. In addition, the PAYE allowance has become a tax credit. However, significant timing benefits remain, depending on the accounting period used by the taxpayer. In addition, the expenses regime remains somewhat more liberal than that afforded to the PAYE sector.

The cost to the Exchequer of extending the PAYE credit to farmers and the self employed, including proprietary directors, would be significant and is estimated at €610 million in a full year. The cost of abolishing the PAYE credit and increasing the personal credit by the same amount is estimated at €750 million in a full year. The additional cost would arise because the personal credit is transferable between spouses.

As indicated in my reply to a similar question on 13 November 2007, it should be borne in mind that there is already in place a generous package of reliefs and specific arrangements that continue to be available exclusively to the farming sector.