The Department of Finance has clarified the position on the way the higher income levies introduced in the Budget will work.
In the Budget, the 1%, 2% and 3% levies were doubled and the thresholds lowered. But the measure also included a composite structure - a combination of the higher and lower rates - aimed at ensuring that all taxpayers were treated equally.
The department has confirmed that self-employed people or directors who brought forward their income into the first four months of this year so as to avoid paying the increased levy will pay an annual or composite rate to ensure that they pay their fair share.
The department said this structure was used to ensure that all taxpayers were treated in the same way, pointing out that PAYE taxpayers are not in a position to manipulate their income.
The department also says statutory redundancy payments will be exempt from the income levy in the same way as they are exempt from income tax. Redundancy payments above statutory levels are also exempt from the levy up to certain limits.
The basic limit is €10,160 plus €765 per year of service above statutory redundancy.
Earlier, Fine Gael finance spokesperson Richard Bruton said that newly redundant workers faced the prospect of having the higher levy backdated on their redundancy payments.
'Thousands of people who have been made redundant by the end of April are likely to have the new income levy backdated on a portion of their redundancy payments, even though the higher levy only kicks in on May 1,' he said.
Mr Bruton asked whether Finance Minister Brian Lenihan made a mistake by including people receiving redundancy sums in a measure designed for people who make annual tax returns, or whether he 'deliberately intended to sneak in this retrospective tax'.
It is understood the department may look at the issue of redundancy payments and the income levy in the context of the Finance Bill.
