Although, in his own words, Mr McCreevy's Budget continued a trend of radical reform of the tax system, the Budget statement contained little specific news for business. Nonetheless, the business sector will be pleased with the range of income tax measures which were announced this week. The reduction in both the standard and higher income tax rates and the focused widening of the standard rate band, through what the Minister termed "individualisation", will be seen as pro-business.

Married couples are currently entitled to the same allowances and tax bands as two single people. This has been the case since a Supreme Court decision in the early 1980s which decreed that taxing a married couple at a higher rate than two unmarried persons constituted a breach, by the State, of its constitutional undertaking to guard with special care the institution of marriage. Mr McCreevy cleverly sidestepped this constitutional issue by ensuring that two working spouses continue to be taxed in the same way as two single, but working, individuals.

In effect, the measure extends an additional standard-rate band allowance of up to £6,000 (increasing over three years to £28,000 - €35,553) to encourage the second spouse to take up work. At one level this affords an additional tax relief for couples who must incur substantial non-tax deductible expenditure on childcare to earn a second income. It is surprising that the Minister didn't opt to extend tax relief for childcare costs in a less politically sensitive manner.

The 2 per cent reduction in tax rates will encourage work at the margin, while the Minister's commitment to continue this downward trend is encouraging. Even at 22 per cent, effective from April 6th next, the standard income tax rate continues to be a far cry from the one shilling and two pence in the pound rate which applied at the beginning of this century. The 22 per cent rate will also apply to professional services retention tax and deposit interest retention tax (DIRT) from April 6th. Overall, the combined income tax package, where married couples will gain up to £40 per week, should go some way towards moderating pay increases and managing wage inflation.

The software sector will be disappointed that the Minister has as yet not acted on its proposals to take executive share options outside the income tax net, to be replaced by a 20 per cent capital gains tax charge on share-option gains. Such a measure, which even Mr McCreevy seems to accept as being worthwhile, would help to curb salary inflation in an industry facing increasing skills shortages. It is disappointing that the Minister chose to string out an issue of such relevance to such a fast-moving sector. His comments suggest a misplaced emphasis by the Department of Finance on the tax planning potential of share-option schemes. A well-policed share-option regime, coupled with existing anti-avoidance legislation, should deal with the Department's concerns in this area.

The reduction in the capital gains tax rate applicable to non-residential development land from 40 per cent to 20 per cent, coupled with the introduction of a special ring-fenced income-tax rate of 20 per cent for residential land sales, has interesting implications.

Under current legislation, the 20 per cent capital gains tax rate attributable to residential land gains is due to expire on April 6th, 2002, to be replaced by a penal 60 per cent rate from that date. This future increase, signalled two years ago, was intended to speed up the release of residential land for development. It has recently become apparent that the land that is closest to development is owned by land dealers who would have been taxed at income-tax rates of 46 per cent or corporation tax rates of 25 per cent on their gains. They will now be taxed at 20 per cent. It would appear that the Minister's proposals may be signalling the reversal of the proposed 60 per cent regime.

Other sectors to benefit from Mr McCreevy's largesse include the film production sector. In the aftermath of the inaugural IFTA Awards, a five-year extension has been granted to the so-called Section 418 tax incentive for film production. David Kennedy is a tax partner in KPMG and a member of KPMG's European Direct Tax Network.