4 year plan – taxation measures

Income tax

Government is committed to achieving the targeted direct income tax increases over the four years”

  • €1.875m in income tax increases over the period 2011-2014, frontloaded by 40% in 2011
  • Increase in income to tax equivalent to a reduction in income tax credits and rate bands by 16.5%. This may be achieved by tax rate increases and/or PRSI and levy adjustments. This will be considered at each budget. It will rebase the tax system at 2006 levels
  • Entry point for income tax for PAYE workers to fall to €15,300 by 2014 (currently €18,300)
  • Marginal tax rates to remain the same over the term of the plan
  • “it is intended fundamentally to reform the income tax system.”

Pension tax reform

  • Removal of PRSI and health levy relief on pension in 2011
  • Reduction of annual earnings cap from €150,000 to €115,000 in 2011.
  • Tax relief on contributions to be reduced to the standard rate from 2012to 2014. Interestingly the report states the standard rate at 20% in 2014…

General tax issues

The following expenditures are to be abolished in 2011:

  • Tax exemption for patent royalties.
  • The investment allowance for machinery and plant and for exploration expenditure.
  • Approved Share Options Scheme.
  • BIK exemption on employer provided childcare.
  • The accelerated allowance for capital expenditure on farm buildings for pollution control.
  • The tax exemption for payments to National Co-operative Farm Relief Services Ltd.
  • Income tax relief for rent paid for private rented accommodation.37
  • Income tax relief for trade union subscriptions.
  • Income Tax Age Credit (phased over 4 years).
  • Income Tax Age Exemptions (phased over 4 years).

The following are to be significantly curtailed over or restricted:

  • PRSI, Health and Income Levy charge on Approved Profit Sharing Schemes.
  • PRSI, Health and Income Levy charge on Approved Save-As-You-Earn Schemes
  • PRSI, Health Levy charge for Unapproved Share Options
  • PRSI, Health Levy charge for Share Awards
  • Artist’s exemption from Income Tax (Restrict exemption to €40,000 earnings).
  • Ex-gratia termination and pension lump sum payments in excess of €200,000 to be taxed.

VAT

The standard VAT rate (currently 21%) will be increased to 22% in 2013, and to 23% in 2014.

Property tax

  • An interim site value tax €100 is to introduced in 2012
  • A full value based tax will be introduced in 2013

Capital taxes

  • The current single capital gains tax (CGT) rate of 25% will be changed to a system of differing rates for different levels of gains in 2012
  • A similar system will also be introduced for capital acquisitions tax (CAT)
  • Reliefs and exemptions from CGT, CAT and stamp duty to be abolished or greatly restricted

Business expansion scheme

  • The business expansion scheme is to be replaced with a “Business Investment Targeting Employment Scheme (BITES)
  • The new scheme will have a “simple and efficient” certification process
  • The amounts that companies can raise will be increased “significantly”

Carbon tax

Carbon tax is to double from €15 per tonne to €30 per tonne -€10 in 2012; €5 in 2014

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