Written answers

Tuesday, 20 October 2015

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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253. To ask the Minister for Finance further to Parliamentary Question No. 59 of 11 March 2015, which estimated the cost of extending, to the self-employed, an earned income tax credit equivalent to the Pay-As-You-Earn tax credit at €470 million, the reason the estimated cost in Budget 2016 of a €550 tax credit for the self-employed was only €18 million in 2016, and €61 million in a full year; and if he will make a statement on the matter. [36600/15]

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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254. To ask the Minister for Finance the number of persons who are projected to benefit in 2016 from the introduction of an earned income tax credit; and if he will make a statement on the matter. [36601/15]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 253 and 254 together.

Regarding the cost of an earned income tax credit, I am advised by the Revenue Commissioners that the €470 million estimated cost of extending the Pay As You Earn (PAYE) credit, provided in response to Parliamentary Question No. 59 of 11 March 2015 was based on extending the €1,650 credit to all non-PAYE cases including Schedule D, Proprietary Directors and assisting spouses. In addition, the estimate included cases classed as Schedule D where most of their gross income is non-PAYE. Some of these cases may have been availing of the PAYE credit. The estimate did not take into account the ability of the credit to be fully absorbed. On this basis it was estimated that the credit would be available to approximately 284,600 cases.

The estimated cost to the Exchequer of the €550 Earned Income Credit (EIC) was calculated on the basis that it would be only available to taxpayers earning self-employed trading or professional income under Cases I, II and III of Schedule D and to business owner/managers who are ineligible for a PAYE credit on their salary income.  This cost is also based on an assumption that where a person may qualify for both a PAYE Credit and an EIC, the maximum credit available will be €1,650.

In addition, it should be noted that the March costing was based on estimated incomes for 2015. Pre-Budget costings are on the basis of estimated incomes for 2016. This should also be considered when comparing the two.

The Deputy may also wish to note the reply to his PQ, No. 65 of 1 October, which estimated the cost of introducing an Earned Income Credit of €1,650 for self-employed people at €137 million. For the purposes of this estimate, as specified in the response, it was assumed that the credit would only be extended to cases identified to be in receipt of Trading or Professional (Case I or Case II) income, and not currently in receipt of the PAYE credit. The estimate did not take into account the ability of the credit to be fully absorbed.  

In relation to the number of persons who are projected to benefit in 2016 from the introduction of an earned income tax credit, I am advised by the Revenue Commissioners that, based on the approach outlined above to estimate the cost to the Exchequer of the €550 Earned Income Credit (EIC), it is estimated that this credit would be available to approximately 111,600 cases.

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