Income levies to be doubled

Income levies are to be doubled and the PRSI ceiling is to be raised, Minister for Finance Brian Lenihan told the Dáil today.

In his supplementary budget speech, Mr Lenihan said tax revenue is expected to be just €34 billion this year.

He said changes to the income levy, health levy and PRSI rates being introduced today will bring in an extra €1.3 billion this year and €2.8 billion in a full year.

There will be no alteration to the current income tax rates as the scope for introducing such changes was limited during the middle of  a tax year.

However, income levies, which were imposed on all workers from January, will increase. Mr Lenihan said the entry rates would also be lowered and minimum wage earners would be brought into the net.

From May 1st, the income levy rates will be doubled to 2 per cent, 4 per cent  and 6 per cent.

The exemption threshold will be €15,028. The 4 per cent rate will apply to income in excess of €75,036 and the 6 per cent rate to income in excess of €174,980.

The Minister said those on the minimum wage of €17,500 would now pay a levy of €350 per annum, those on €50,000 per annum would pay about  €1,500, while those on €300,000 would pay €15,655 every year.

The ceiling on Pay Related Social Insurance (PRSI) contributions by employees is to be increased to €75,036 per annum, compared to the present €52,000.

The health levy will also double to four or five per cent, with the higher rate  applying to incomes over €75,036.

The Deposit Interest Retention Tax rate will increase to 25 per cent and tax on Life Assurance Policies and Investment Funds will rise to 28 per cent. These changes are expected to generate an additional €50 million this year and €70 million in a full tax year.

A 1 per cent levy on life assurance premiums is to be introduced and will apply to premiums received by an insurer on or after June 1st. This is expected to raise €83 million this year and €140 million in a full year. The non-life insurance levy of 2 per cent will rise to 3 per cent, a measure that is expected to raise €27 million this year and €40 million over a full year.

Capital acquisitions thresholds are to be lowered and the tax  on all gifts or inheritances is to increase to 25 per cent from midnight tonight. These measures will generate an additional €42 million in a full year.

Mr Lenihan,  who warned further tax increases would be introduced next year, said he was “acutely aware” today's measures would lead to falling standards of living. "Notwithstanding all the increases made today, Ireland will continue to have one of the lowest tax wedges within the OECD," he said.