The government published the National Recovery Plan 2011-2014 on 24th November 2010. It sets out how the country is going to address the huge deficit that has built up in the public finances. This article looks at the changes to the tax system over the next few years.
We will have to wait until Budget day on 7th December 2010 to get detailed information on all proposals.
Chapter six of the National Recovery Plan deals with taxation measures envisioned by the Government. Increases in taxation will account for one third of the budgetary adjustment necessary. That amounts to five billion euro. 40% of this increase will be front-loaded and adopted in 2011.
The emphasis will be in broadening the tax base. This will be achieved by increasing the number of people paying tax and by abolishing/restricting reliefs and exemptions from tax that have been enjoyed previously.
INCOME TAX
- Entry level to be decreased from €18,300 in 2010 to €15,300 in 2014.
- Removal of PRSI and Health Levy relief on pension contributions in 2011
- Tax relief on pension payments is allowed at the highest rate of tax at present. This will be gradually changed to standard rate only by 2014.
- Phased abolition of legacy reliefs(reliefs related to property based incentives that were terminated in 2006)
- The following tax credits that will be abolished in 2011 are:
(a) Rent tax credit on private rented accommodation
(b) Trade Union Subscription tax credit
(c) Income tax age credit (Will be phased out over the four years.)
- Other measures that will be abolished:
(a)Tax exemption on patent royalties
(b)BIK exemption on employer provided childcare.
(c)Accelerated allowance for capital expenditure on farm buildings for pollution control
(d)Tax exemption for payments to National Co-Operative Farm Relief Services Ltd
(e)Income Tax age exemptions (Will be phased out over four years)
(f)Investment allowance for machinery and plant and for exploration expenditure
(g)Approved Share Options Scheme
- The following reliefs will be curtailed or restricted:
(a) PRSI, Health Levy and Income Tax charge on : Approved Profit Sharing Schemes,Approved Save as you Earn Schemes,Unapproved Share Options and Share Awards.
(b)Artist’s exemption from income tax (Restrict exemption to €40,000 earnings.
(c)Ex Gratia termination and pension lump sum payments in excess of €200,000 to be taxed.
VALUED ADDED TAX AND INDIRECT TAX
- The standard rate of VAT will be increased from 21% to 22% in 2013 with a further increase to 23% in 2014
- The government will be examining zero rated Vat items in line with EU level considerations of the matter
- Changes to excise duties and licences will be announced in the budget on December 7th 2010
CAPITAL GAINS TAX AND CAPITAL ACQUISITIONS TAX
- The base for Capital Gains Tax and Capital Acquisitions tax will be broadened while the level of reliefs and exemptions for these taxes will be reduced.
- The single rate of 25% will be changed to a system of differing rates for different levels of gains.
CORPORATION TAX
- The corporation tax rate will remain unchanged at 12½%.
SITE TAX
- A site value tax will be introduced in 2012 of €100
- A full value based tax will be introduced in 2013
CARBON TAX
- This tax will be doubled over four years
Click on this link to access the full National Recovery Plan