Tax policies ignore poor, says agency

Successive governments have ignored the taxation plight of the low-paid and unemployed, a Combat Poverty Agency seminar was told yesterday. Dr Francis O'Toole, an economist at Trinity College, Dublin, said that in spite of their rhetoric, governments' Budgets were favouring high earners more than low earners.

He presented a paper, "Tax and PRSI Reform from a Low-Income Perspective", for Combat Poverty, stating that many low earners were facing a higher tax rate, while high earners had seen a reduction in their tax rate. Average industrial earners had seen the average tax rate charged on their income increase from 27 per cent to 30 per cent between 1980 and 1995.

"It is clear that recent budgets have not placed particular emphasis, in reality as opposed to rhetoric, on the taxation position of the low-paid/unemployed," he said.

He recommended that political parties' tax and social welfare proposals should be independently assessed by the Economic and Social Research Institute before elections.

Comparing the 1993 and 1997 Budgets, he said the width of the 27 per cent tax band had increased to £9,000 in 1997, an increase of over 32 per cent. The threshold for entering the top tax bracket had increased by more than 30 per cent. But the single person's allowance and PAYE allowance - which offer proportionately higher benefits to the lower paid - had risen from £2,900 prior to the 1993 Budget to £3,700 after the 1997 Budget, a less than 28 per cent increase.

He said that the income tax system had become more regressive when contrasting 1980 with 1995. Employees on 50 per cent of the average industrial wage had seen their average tax rate increase from 14.4 per cent to 17.4 per cent. Those on five times the average industrial income have seen their average tax rate fall from 50.6 per cent to 46.8 per cent, he said.