How tax policies stack up
Assessing the impact of an FG/Labour coalition
With the razzmatazz of the election now fading, it is time to turn our attention to the impact of the new coalition on taxation policies.
Fine Gael is promising to unveil a new budget within 100 days of taking office. The party's manifesto proposes no increase in income tax or reduction in tax credits and bands. A modification of the restriction on tax shelters for high earners would ensure that they pay at least 30pc tax on incomes of €250,000, down from its current level of €400,000. Tax exiles would be required to spend more time out of the country to avoid the Irish tax net.
The party also suggests an increase in mortgage interest relief for first-time buyers who purchased between 2004 and 2008 but the scrapping of mortgage interest relief for persons buying after June 2011.
In Government, Fine Gael is likely to suspend legacy property reliefs and increase the annual charge on second homes from €200 to €300. The party proposes a temporary levy of 0.5pc of the value of all pension funds and the abolition of PRSI relief on employer pension contributions. Fine Gael also intends to reduce current pension fund thresholds and increase the minimum annual withdrawal rate for Approved Retirement Funds (ARFs) from the current level of 5pc per annum.
It is committed to maintaining the 12.5pc corporation tax rate and the introduction of a bank levy. The party plans to reduce employers' PRSI by 50pc on salaries of up to €356 per week as an incentive to hire unemployed persons.
Fine Gael also intends to increase the standard rate of VAT by 1pc to 22pc in 2013 and 23pc in 2014, and suggests a reduction in the lower rate for services from 13.5pc to 12pc or less for two years. Deposit interest retention tax (DIRT) would rise from its current rate of 27pc to 30pc. Gift tax and inheritance tax would rise from 25pc to at least 30pc and the tax-free thresholds would be reduced by at least 20pc.