Don't Wade through 561 Pages of Jargon from the Commission on Taxation. Ireland's Leading Personal Finance Expert Has Done It for You - and Added Up All of the Alarming Costs to Your Family
Byline: COLM RAPPLE
|INCOME TAX While many tax reliefs will be abolished, most taxpayers should end up paying less income tax, with the cuts being funded by other taxes elsewhere. The proposal is that the current two rate system - 20 per cent and 41 per cent - will be replaced by a three scheme, with the new rate being a middle rate between those two. Meanwhile, the health levy, currently 4 per cent on the first E75,036 of income and 5 per cent thereafter, would be abolished, while the PRSI ceiling, currently E75,036, would be gradually lifted and the whole PRSI system reformed. High earners would continue to pay a minimum tax rate of 20 per cent of their total earnings but the definition of 'high earner' would be lowered from E500,000 to include those on more than E250,000. Many of the remaining tax breaks would be abolished, including some - like the relief on rent, trade union dues and nursing home charges - that affect relatively low income earners the most.
|SPENDING TAXES Mainly because of EU constraints there are no proposals to change VAT. This is the one area of tax where Brussels rules. It is proposed that the rates of excise duties on drink and tobacco should be considered in the context of health, public order issues and the impact of crossborder trade. Nothing new there.
|VEHICLE REGISTRATION TAX It won't happen overnight but in time the hated VRT would be abolished and replaced with taxes on road usage - such as higher fuel charges and congestion charges. The Commission report quotes a study which indicates that a 10 per cent hike in fuel prices will result in a 7 to 8 per cent cut in fuel usage, but admits that this could take ten years to materialise. In the short-term, it looks as if the Carbon Tax will have to satisfy the Greens.
|CHILD BENEFIT If it is not taxed, the proposal is to means test child benefit. But either way it would be treated as taxable income. Both options bring a number of administrative difficulties that the Commission simply kicks into touch. But if this is taken up by the Government the outcome will certainly mean less benefit for those on higher incomes, and possibly more for those on low incomes.
|CAPITAL TAXES Two concessions are proposed. Indexation would be reintroduced for capital gains tax, so that tax would no longer be payable on gains due solely to inflation and the tax would no longer apply to gains made on agricultural land compulsorily acquired - provided the proceeds are reinvested. But the relief on sites transferred to children would be abolished and there would be a curtailment of the relief on the transfer of farm and business assets. At present such assets may be valued for tax purposes at only 10 per cent of their real value. It is proposed that that would be increased to at least 25 per cent.
|PROPERTY TAX Politically sensitive but not ruled out completely is the proposal to replace stamp duty on residential property with an annual house tax. Those who have already paid stamp duty on a purchase would be exempt from the annual tax for seven years. …