The Minister for Finance stressed his priority in the tax area was those on low pay, when he answered questions in the Dáil for the first time in his new portfolio, writes Michael O'Regan.
Rejecting assertions that the Government had given "inadequate tax justice" to more taxpayers, Mr Cowen added: "The net tax take from those on the average industrial wage, including PAYE, PRSI and the health levy, has been reduced by 10 per cent from 27 per cent under the Rainbow coalition to 17 per cent under this administration."
He was replying to Labour's finance spokeswoman, Ms Joan Burton, who asked if people could look forward to some "tax justice" for PAYE workers in the forthcoming Budget. He said some 380,000 PAYE workers were exempt from tax when the Government took office in 1997.
"Today, as a result of seven successful budgets, introduced by my predecessor, 622,000 taxpayers are exempt from tax.
"For the 340,000 taxpayers who previously paid tax under the Rainbow coalition of previous governments, that is defined as 'tax justice'."
Mr Cowen said the number of income earners exempt from tax had grown steadily since 1997, to 622,800 from 380,400. "That represents an increase of well over 60 per cent."
Ms Burton said some wealthy taxpayers would make zero tax returns this month, while 632,000 PAYE people would pay tax at 42 per cent. She asked if the Minister agreed with the Tánaiste that something had gone sadly wrong with the system when so many workers were now paying at the top rate.
Earlier, the Minister told Mr Paul McGrath (FG, Westmeath) that it would cost about €1.3 billion to have no more than 400,000 income earners paying tax at the top rate in 2005.
Mr McGrath said the Minister had neglected to mention the important statistics. Someone on 90 per cent of the minimum wage still paid tax. "That was not the situation in 1997 for people on the minimum wage." When Mr Cowen said the top rate in 1997 was totally different from today's rate, Mr McGrath said the top rate was paid by 50 per cent more people. He added that of the 600,000 people who were working, 240,000 were not paying tax, while the same number were paying it at the top rate.
Mr Cowen said there were more paying tax at 42 per cent than were paying it at 46 per cent.
The Minister said there were 600,000 more people working and 340,000 more not paying tax.
Replying to the Green Party spokesman on finance, Mr Dan Boyle, the Minister said taxation could play a part in attaining environmental objectives.
"However, as Minister for Finance, I am concerned to ensure that in developing policy on tax measures we take into account any effects on Ireland's international competitiveness, particular with regard to non-EU countries which compete with Ireland and which may have low taxes on energy."
Mr Cowen added that the Government had decided a carbon tax was not an appropriate policy option and that it would intensify action instead on the non-tax measures under the national climate strategy. The environmental benefits would not justify the difficulties that would arise from the introduction of such a tax.
He added that apart from the carbon tax, the national climate change strategy envisaged other initiatives in the tax area, with one such example being tax reliefs for green initiatives.
"Essentially, this approach uses the tax system to provide incentives for certain behaviour."
Mr Boyle said Ireland had the least number of environmental fiscal measures of any of the developed countries and was listed as such by the OECD.