The proportion of taxpayers paying tax at the top rate will be higher in the next tax year as a result of last week's Budget. The Minister for Finance has revealed in a reply to a written question that his Department estimates that 38.2 per cent of taxpayers will be on the top rate in the 1998/99 tax year. This is a 1.2 per cent increase over the 1997/98 figure of 37 per cent.
This figure is, therefore, going in the opposite direction to that promised in the Programme for Government agreed last June between Fianna Fail and the Progressive Democrats. That programme said the proportion paying tax at the top rate would be reduced over five years to 20 per cent.
News of the drift in the opposite direction came in reply to a Dail question tabled by Fine Gael TD Mr Paul McGrath. His party colleague and finance spokesman, Mr Michael Noonan, said yesterday that the increase was due to the Government's decision to widen the standard rate tax band by only a marginal amount.
"In the 1997/98 tax year, a single person will pay tax at the higher rate on all income in excess of £13,700," Mr Noonan said in a statement yesterday. "As last week's Budget has only made marginal changes in this by widening the standard rate band by just £100, pay increases under Partnership 2000 will drive very significant numbers of taxpayers on to the higher rate. Whatever this is, it is not tax reform."
Mr Noonan said the last time the Progressive Democrats were in government, the numbers paying tax at the higher rate increased, from 37.4 per cent in the 1989/90 tax year to 40.9 per cent in 1991/92, the highest rate in the past 10 years.
A spokeswoman for Mr McCreevy said this was but the first of five budgets. "We said in the Programme for Government that we would broaden the bands over five years to ensure that 80 per cent of taxpayers do not pay tax at the higher rate." She conceded that the proportion of taxpayers on the top rate would increase by 1.2 per cent, "but the actual rate has been reduced by two percentage points".