Dáil Éireann - Volume 507 - 24 June, 1999

Other Questions. - Tax Free Allowances.

8. Mr. Noonan asked the Minister for Finance if favourable consideration will be given to the proposal by the Irish Hotels Federation for an additional tax free allowance of £2,000 per annum to those over 35 who have not worked or drawn benefit for five years; and if he will make a statement on the matter. [16088/99]

Mr. McCreevy: The proposals by the Irish Hotels Federation to introduce a new £2,000 tax allowance which it refers to as the homemakers Revenue job assist have been received by my Department. The proposals appears to be aimed at encouraging non-earning spouses, which in current labour market conditions are predominantly women, back into the workforce.The proposal also envisages the retention of existing social welfare and medical card benefits.

These proposals, along with other proposals for new or increased tax allowances and reliefs, will be examined in the run-up to the budget. Deputies will appreciate that it would be difficult for reasons of equity to restrict any such new allowance to persons taking up employment in a particular sector. Similarly, I have concerns about the feasibility of restricting any new allowance to persons over a certain age. There is also the position of those persons already employed to consider who may regard it as unwelcome that new employees only should receive such allowances.

The Government is committed to reducing the burden of personal taxation to reward effort and improve the incentive to work. The reductions in tax rates in my first budget, together with the major reform introduced in the last budget, have considerably reduced the burden of taxation, particularly on the lower paid, and this will undoubtedly improve the incentive to work. The income tax changes in the last budget removed over 80,000 taxpayers from the tax net.

Deputies will recall that in the 1998 budget I announced a new tax-based employment incentive known as the Revenue job assist. This new scheme is a focused, two-part initiative which gives the long-term unemployed an incentive to take up employment and gives potential employers an incentive to employ a long-term unemployed person as opposed to someone else [79] in the labour market. The scheme is a temporary allowance which is phased out over three years and is designed to help the long-term unemployed bid themselves back into work.

The Irish Hotels Federation's proposal, while lasting three years, is not reduced during that period, and could give extra tax-free income to households who already have a substantial family income. However, I will examine this proposal for the next budget.

Mr. Deenihan: Reading the Irish Hotels Federation's recent newsletter, one would be led to believe that the Minister is considering its proposal seriously and that he has almost conceded to it. Does the Minister accept that there is a major labour shortage in the hotel industry and in the tourism industry in general? Does he accept that targeted incentives must be made available to attract workers to that sector? Does he further accept that the tourism industry has been forced to look abroad for workers? Many Dublin hotels now employ workers from France, Germany and other countries because they cannot get Irish workers.

Mr. McCreevy: I accept that there has been a tightening of the labour market in the hotel sector in recent years. However, the same has occurred in other areas of the economy. There are still 193,000 people on the live register. The live register figure, or the more widely accepted labour force survey, indicate that our unemployment rate remains at over 6 per cent, so there is still a fair pool of workers available. The Irish Hotels Federation has come up with an interesting proposal which is somewhat analogous to the Revenue job assist scheme. However, other sectors of the economy are also protesting the need for a freeing-up of the labour market.

The Irish Hotels Federation has given much thought to this issue. It sees a pool of workers, particularly married women, who might be available to join the labour market. The participation rate of that pool of workers is lower in Ireland than in other countries. I accept that the high rate of marital tax is a disincentive to women to return to the labour market.

Mr. Stanton: Has the Minister any plans to make is easier for married women, particularly those whose children are reared and have left home, to participate in the labour market or to partake in training? There do not appear to be any incentives for them to do so at present.

Mr. McCreevy: The participation rate of married women in the Irish labour force is less than in other northern European countries. I accept that the tax disincentive is a factor. The measures introduced in recent budgets and taxation changes will improve matters but I recognise that [80] it is a consideration. A higher participation rate among this pool of workers would increase the numbers in the labour market. I will give this matter further consideration in the run up to the budget. Training schemes are a matter for the Minister for Enterprise, Trade and Employment but I will bring the Deputy's concerns to her attention.