Plan To Remove Low Paid From Tax Net Called 'Ineffective'

by Robert Lee, Tax-News.com, London

10 October 2001

A study from the Irish-based Economic and Social Research Institute (ESRI) has found that recent demands by Ireland's trade unions that minimum wage earners in the country who earn £4.70 an hour be removed from the tax net would not benefit 40 per cent of the country's lowest paid workers at all.

Indeed, the cost of the tax changes is expected to be around £780 million, £650 million of which would go to those on middle and top income wages, with a mere £130 million being allocated to the poorest 40 per cent of workers. According to the study this is because those who do not have to pay tax will only gain from the amount of tax they had previously been paying but those who stay within the tax net will receive the full benefit.

During a conference on "Budget Perspectives" this week, the ESRI said that under the plan the disposable income of middle-income earners would rise by 3.5 per cent and the top 10 per cent of earners would receive 2.5 per cent.

The paper recommends that another study should be undertaken to research other ways of helping low income workers such as a system of refundable tax credits.

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