Tax hikes ruled out but stealth charges on way
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TAXPAYERS will escape further swingeing increases under sweeping new changes proposed to the taxation system, the Irish Independent can reveal.
It was feared that hundreds of thousands who have already been hit with a raft of income levies would bear the brunt of more tax hikes in the next Budget.
However, the report, which was compiled by the government-appointed Commission on Taxation, says that any increases or new charges should be balanced out by the reducing of levies on income.
The Commission on Taxation -- chaired by former Revenue Commissioners chairman Frank Daly -- was set up by the Government in February 2008, with a brief to review all the aspects of the tax system.
Its 700-page report will be delivered to the Government over the coming days.
It is not yet clear if the Government will go along with central thrust of the report, which is to balance new taxes and charges with reductions in others.
However, the commission's recommendations are certain to weigh heavily with Finance Minister Brian Lenihan when he attempts to balance the exchequer's books in the lead up to the Budget. The report -- which has been seen by the Irish Independent - makes a total of 250 recommendations. These include:
- taxing child benefit with a tax credit given to lower-income families to make up for any negative impact . However, the report states that other options should be looked at in relation to child benefit, given the huge logistical difficulties in taxing it.
- introducing water charges, with no tax credit, for every household, with meters eventually installed in all homes. This would raise around €500m a year to to fund local authorities.
- Imposing property taxes on all homes -- with the exception of the lower paid and elderly. Initial tax -- averaging around €1,000 -- to be based on self-assessment but eventually every home would be valued.
- Introducing a new carbon tax on energy use.
- Replacing tax reliefs for the blind and the handicapped with direct payments.
- Scrapping artists' exemption from paying taxes.
- phasing out tax relief on bin charges and trade union subscriptions.
- Abolishing tax relief for those providing student accommodation in the Gaelteacht.
- New SSIA-type pension for lower paid. State to put €1 for every €2 put up by workers.
- applying a new tax relief rate of 30pc for those already paying into a pension. This would mean that those on the 20pc income tax rate would get more tax relief, while those on the 41pc rate would get less tax relief for pension contributions.
- Introducing a €200,000 cap on the retirement tax-free lump sum.
- Changing the ceiling on PRSI payments. Currently workers pay PRSI up to €75,036 only. PRSI should be paid on all income by workers, according to the report.
Report
The commission report has not yet gone to the Department of Finance, but is expected to be delivered in the next few days.
The report is likely to be discussed by the Cabinet early in September.
The department last night confirmed that it had yet to receive the report.
Despite the recommended list of tax hikes and charges, households will not be hit with further swingeing taxes if the report's recommendations are followed.
This is because it says any new taxes should be cancelled out by reducing existing taxes on labour such as the income levy.
Currently, the levies are so high that anyone earning €75,036 pays 53pc in taxes and levies to the State. This is made up of 41pc tax, 4pc in PRSI, a health levy of 4pc and an income levy of 4pc.
- Charlie Weston Personal Finance Editor
