The Government's four-year plan aims to raise €5 billion through tax measures by 2014, with almost €1.9 billion of this from income tax.
This includes a reduction of the equivalent of 16.5% in the value of tax credits and tax bands over the four year. The plan says, however, that the option of changes in tax rates will be in the Government's considerations before each Budget.
The report says around 45% of income earners were paying no tax in 2010, and this is unsustainable. The changes aim to bring the tax system back to 2006 levels.
The plan repeats that the Government plans to merge PRSI and the health and income levies into one universal social charge. But there will be no change in the 12.5% corporation tax rate.
On pension reliefs, the plan calls for a phased reduction in tax breaks for those on the higher rate of tax to the standard rate by 2014. This will begin with the abolition of workers' PRSI and health levy relief on pension contributions next year. After that, the rate of relief will come down to 34% in 2012, 27% in 2013 and 20% in 2014.
The annual earnings cap for pension contributions will be cut by almost 25% to €115,000 next year. The rate of relief on public service pensions will also be reduced. These measures will raise €700m over the four years.
There will be no change to the current arrangements for mortgage interest relief, as the Government believes this would increase the risk of mortgage defaults.
A number of other tax breaks will be scrapped from next year, including the relief for trade union subscriptions. Relief for rent paid for private rented accommodation is to be phased out. Income tax age credits and age exemptions are to be phased out over four years. The benefit-in-kind exemption on employer-provided childcare will also go next year. These measures are aimed at saving €280m a year.
The artist's exemption from income tax will be restricted to €40,000 of earnings.
VAT to rise, site valuation tax planned
VAT will not change for the next two years, but the standard rate will rise from 21% to 22% in 2013 and to 23% in 2014. The Government also plans to raise €110m from excise duties next year.
On property, a site valuation tax will be brought in in 2012, aimed at funding local services. It will initially be around €100 a year, with the final rate decided on in 2013 when valuations of property have been completed. This will apply to all land other than agricultural land and land subject to commercial rates. It will affect 1.8 million households.
The carbon tax will be doubled over four years from €15 a tonne to €30 a tonne.
The current system of capital gains tax will be changed in 2012 from the current 25% to a system of differing rates for different levels of gains. There will be a similar system for capital acquisitions tax.
