Households face being up to €190 worse off after the Budget as income tax cuts could be wiped out by increases in other charges and levies.
The Budget is likely to see an increase in the amount of money people can earn before they hit the top rate of income tax, but this could be cancelled out by a rise in PRSI and higher carbon taxes.
Householders could be between €120 and €190 worse off overall after the Budget, according to analysis by the Irish Tax Institute.
It said Finance Minister Paschal Donohoe has various options for next month’s Budget but he is likely to increase the entry point to the top income tax rate.
Allowing workers to earn another €1,000 before they hit the 40pc income tax rate would be worth about €200 a year to someone on €40,000, according to calculations by the Tax Institute.
Such a move would allow people to earn €35,550 before being hit with the higher tax rate.
Taoiseach Leo Varadkar has indicated that there is likely to be an increase in the higher rate entry point to stop so much of people’s incomes being taxed at higher rates.
The tax body said Mr Donohoe was also considering increasing the PRSI rate from 4pc to 4.5pc for employees. This would cost someone on €50,000 around €250 a year, according to a report prepared for Social Protection Minister Regina Doherty by officials.
There could also be more tax on carbon emissions, which would hit petrol, diesel, coal, briquettes and gas. Higher carbon tax would cost the average household an extra €69 a year if just €5 is added to the charge per tonne of carbon emissions, the Tax Institute said, quoting Economic and Social Research Institute data. Adding €10 to the carbon charge would cost families €138 a year.
Olivia Buckley of the Tax Institute said it was not sure which of the options would be chosen by Mr Donohoe, as they were political decisions.
She added that Ireland was unusual in terms of how early earnings hit the higher tax rate. At the moment, workers pay the 40pc income tax rate on earnings over €34,550.
“We can see why the Taoiseach is talking about this. That needs to addressed in terms of the squeezed middle,” said Ms Buckley.
She added that the State tax-raising system is skewed towards income tax. Income tax and the universal social charge represent 40pc of all taxes raised, with only 16pc coming from corporate tax.
The majority of income tax is paid by those earning more than €55,000. Some 85pc of income tax is paid by those earning middle and higher income.
Almost a third of workers pay no income tax at all.
Article Source: http://tinyurl.com/kbwqb42
- Ibec expects employment growth to slow down in 2019
- Central Bank seeks extra power to force banks to further increase their capital
- Booming economy sees incomes soar to record levels
- Controversial copyright reforms get backing of EU countries
- First Budget surplus for State since 2007 as ‘lost decade’ took toll on national purse
- 21 Belvedere Place, Dublin 1
- +353 1 855 4188
- +353 1 836 6550
- 18 Apr 2019Ibec expects employment growth to slow down in 2019
- 18 Apr 2019Central Bank seeks extra power to force banks to further increase their capital
- 18 Apr 2019Booming economy sees incomes soar to record levels
- 17 Apr 2019Controversial copyright reforms get backing of EU countries
- 17 Apr 2019First Budget surplus for State since 2007 as ‘lost decade’ took toll on national purse