How a sly tax hike may cost you €1,400
The upcoming Budget may have a few nasty surprises coming straight at you, and your pocket, writes Louise McBride
IRISH workers could easily be between €1,000 and €2,000 less well off once the Budget kicks in in two months' time.
Last summer, Taoiseach Enda Kenny ruled out income tax increases in December's Budget -- but let's not be naïve. We'll be hit with sneaky income tax increases of one sort or another in two months' time. Chances are these hikes will come in the guise of cuts to income tax bands and tax credits -- tax hikes in all but name.
Changes like this could push up your tax bill by a few thousand euro next year, depending on your personal circumstances and how much you earn -- leaving you with an even skinnier pay packet.
The Universal Social Charge introduced this year means that many workers now see more than half of their wages disappear on tax. If you're self-employed and earning more than €100,000, you're paying 41 per cent income tax, a universal social charge of 10 per cent and 4 per cent PRSI -- so you're paying 55 per cent tax on a good chunk of your wages. If you're on the average Irish wage of €36,000, you're paying 41 per cent tax on some of your wages, a universal social charge of 7 per cent and 4 per cent PRSI -- which adds up to 52 per cent tax.
With workers now seeing more of their earnings going to the taxman than into their own pockets, the Government has already discouraged people from working here and driven many to flee the country. We could lose our best entrepreneurs as a result -- if we haven't already.
"If you are paying much more than 50 per cent tax, people don't think there's much of an incentive to work," said Donall Gannon, tax partner with KPMG. "Self-employed people will ask: 'Do I really want to do all this work if I'm not even going to get half of my money back in tax?' International experience shows that once you push people over the 50 per cent tax mark, those who can leave the country will."
The Government has to raise money somehow -- so those of us who can't leave the country to escape our draconian tax rates can expect to be squeezed even more through fiddling with our tax bands and credits.
Sunday Indo Business