Next Tuesday, Minister Paschal Donohoe will present his first Budget to the Dáil. Balancing the deficit is always a delicate matter with so many varied interests to be politically taken care of – not all of them vested.
The Tax Strategy Group have given a little insight into some of the items that may come up for review:
Capital Acquisition Tax (inheritance tax) has been earmarked for an increase up to €500,000 for Category A - parent to child - over the coming years. Currently, it is €310,000 - it was €542,000 early 2009!
It is however unlikely that the B category (aunt/uncle, brother/sister, nephew/niece, grandchild) will be increased – the current yield would make any change upwards expensive to the Government.
The Gift Tax currently allows you to give or receive up to €3,000 per annum tax-free and is not part of any inheritance aggregate. There is talk that this will be increased to €3,500 or €3,750.
Capital Gains Tax (CGT) has been unchanged since 2012 but the tax take is down 13% from last year so something needs to be done. Each 1% reduction will cost the Government €25 million while even an increase of €500 onto the current CGT tax exemption of €1,270 will cost €3 million!
They may put a tiered system in place whereby the greater the gain, the higher the rate of tax. Watch out too for potential CGT tax on homes over a certain value when sold. Currently, there is no tax when you sell your home no matter what the price. This may change.
Ireland has the highest rate of excise duty on tobacco products in Europe. At €11.30 for a pack of 20, expect the misery for the smokers to continue with another €1 added - I gave up 25 years ago... Vaping products may escape the wrath of the Minister.
DIRT tax / Withdrawal tax – while the DIRT (Deposit Interest Retention Tax) now at 39% will trundle on to 33% over the next 3 years at 2% reduction a year, it was expected that withdrawal tax (levied when exiting an investment, mandatory after eight years) would go the same way.
However, it would cost the Government €14 million a year if it were it to drop the rates as in DIRT. Remains to be seen what the Government will do here.
Personal income tax bands should also be increased. A single person’s band is €33,800 and an additional €1,000 will cost the Government an extra €178 million a year! Reducing the lower tax of 20% to 19% will cost €580 million.
Universal Social Charge (USC) is likely to be merged with Pay Related Social Insurance (PRSI) meaning more people may be paying PRSI but less USC. The over 70s reduced tax on USC will also be extended or abolished altogether.
Medical cards are also likely to be looked at - widening the eligibility on them or GP visit cards by raising the income thresholds.
Mortgage interest relief for those who have it and due to end in 2017 should be extended while diesel will start its tax increase as the bad boy of energy – matching petrol prices eventually.
All will be revealed Tuesday – you have been warned.
For more information click on John Lowe's profile above or on his website.