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INCOME TAX OPTIONS have been presented to government ahead of October’s budget which indicates that continuing with increasing the standard rate of the income tax cut-off point, the threshold at which earners starting paying the top rate of tax, from €42,000 to €43,890 would cost €465 million.
Coalition leaders have said that the government’s main focus will be on income tax, and have indicated that the standard rate band will continue to rise in this year’s budget.
The Summer Economic Statement outlined that €1.4 billion is available for tax measures.
According to a paper from the Department of Finance’s Tax Strategy Group (TSG), which outlines the possible cost of potential income tax changes ahead for Budget 2025.
Apart of changes to the standard rate, reducing the top rate of income tax from 40% to 39% would cost the exchequer €525 million a year, it finds.
“We’ve consistently made progress on increasing those income bands. I’d hope we could do that again,” Taoiseach Simon Harris said recently.
The Taoiseach has also indicated that further Universal Social Charge reductions (USC) are on the cards.
Tánaiste Micheál Martin, along with the Taoiseach, have also indicated that the budget will target low to middle income earners, stating that it is about ensuring that workers can maximise their take-home pay.
The tax papers note those earning less than €69,000, which represents the bottom 80% of income earners, contribute 21% of total income tax and USC receipts.
Those earning over €102,000 per annum contribute 63% of all the income tax and USC collected in 2024.
Fianna Fáil and Fine Gael ministers are in favour of cutting USC by 0.5%, which would be the same cut that was in last year’s budget.
The tax paper sets out that this year, 37% of all taxpayers will be exempt from USC, while 19% of all taxpayers will pay a maximum rate of USC of 2%, as they are earning up to €25,760 or those over 70 with income of less than €60,000 per annum.
However, a total of 33% of all taxpayers will pay a maximum rate of USC of 4%, which is
taxpayers earning up to €70,044, while 11% of taxpayers will pay the top rates of USC, as they are earning over €70,044.
In addition, the paper sets out that Ireland’s tax base is “highly dependent” on the taxation revenues from a small number of multinational companies.
The latest data shows that over half of corporate tax receipts were paid by just ten large taxpayers in 2023.
This means that €1 in every €7 of all tax collected by the State is directly sourced from these large corporate tax payers, which poses a major concentration risk.
With receipts totalling €23.8 billion in 2023, Corporation Tax is now the country’s second largest source of tax revenue accounting for approximately 27% of receipts.
“A shock to one or more of the small number of high-income sectors could also represent a significant vulnerability for the public finances and one whose impact may not be gradual,” the tax paper stated.
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Banner headlines about income tax are pure political manoeuvring. They have added tax in other areas that directly impact working people. Companies in all sectors have hiked prices for the kast last number of year and blamed everything from inflation to Russia.
@Keyser Söze: Genuine question: what taxes have the government added in other areas?
@Kevin Collins: carbon, increase PRSI (small increase), ERR, and auto enrolment for employers, The big one is the carbon fuel taxes that have a knock-on effect to all retail prices
@did you every wonder: minimum price on purchase of alcohol in shops. Beer cans have doubled in price. While the price of pints have gone up. Tobacco as well
@Kevin Collins: Still paying austerity taxes, still paying taxes as if there hasn’t been 20%+ inflation!!!!
U – Ultimate
S – Scam
C – Charge
USC the temporary tax.
What a weak bunch we all are to allow FFG to continually fool us.
@Vinny Hughes: Yeah they lied or at very best way overpromised. Take your pick on which of those it was but USC was never going to be removed. It takes in way too much money and would leave too much of a hole in the public finances. Their best bet would have been to rename it as something else to take away the toxicity of it a little.
@John Moore: they said it was only temporary.
And there is the Shinners. Trying their best to spin votes off the Coolock inicdent. Trying their best. There is pretty much nothing they wont try. Lowest common denominator party.
The worker ants have to suffer so the lazy dole grasshoppers can live it up.
Time to put the freeloaders on notice.
Food stamps, not cash.
Temporary housing, not free homes for life.
Don’t like it, get a job.
People should be embarrassed to be on long term welfare.
@Paul: If the dole is so fkin good then go on it and stfu whining.
“Increasing the top rate of tax would cost €645 million”…… They also fail to mention that income tax has grown by €10.7 billion from 2019 to 2023. €25.59 billion in 2019 vs €36.31 billion in 2023. And forecast to be bigger this year….. It’s ridiculous!!!!! And that 2019 haul was the biggest ever back then. Breadcrumbs again to the struggling citizens!
@another one? what’s going on is the semi state sec: Yes but you also need to look at the spending side of the ledger this year’s” budget space” is 8bn with 1.4bn going to tax and 6.6bn in extra spending…..I fully understand your point but it can’t be simply one sided and not in context.
@another one? what’s going on is the semi state sec: how does increasing the top rate of tax cost 645M? And that increase in the income tax take is from an increase in the labour force, which has a cost associated with it, and an increase in base salaries – it’s sure not due to an increase in rates. I just thought I’d give some context, which you seem to be a fan of, albeit a selective fan
@SYaxJ2Ts: I think it’s increasing bands by 4.5% would cost somewhere around 500m per annum and the proposal for a .5% reduction of USC would add to that figure, I haven’t finished reading the report yet…so that’s my take now.
@Paul O’Mahoney: yes, probably a typo in the original post – he meant increase in band, not rate
@Paul O’Mahoney: yep, totally agree, but I bet if u look at what the increased spend is on you will be shocked by the new “brown envelope” method. People connected to politicians getting lucrative (uncompetitive) public contracts (that’s our tax money). Fencing on the canal, refugee accomodation pre fab rental for schools to name just a few. Rte debacle repeated everywhere. The waste and sly dealings is rife I’m guessing. As everybody says tiny deductions with one hand taken back with the other all hidden behind the headline inheritance tax giveaway which only favours the rich and narrows the tax take to continue punishing those who work so those who get something for nothing gain.
@Eddie Garvey: Social Welfare is now our second biggest spend after Health the it’s education, while the other stuff happens it’s not the main reason for the massive increase in spending.
@Paul O’Mahoney: agreed, but it’s a big contributor, also social welfare includes payments to people and families that are working full time on low wages, overspend on hospital construction, tax breaks for companies investing in the property rental sector, buying navy boats which you cannot crew because the wages are so low, money spent on foreign recruitment drives for nurses because We won’t pay Irish nurses to keep them here, it goes on and on and reaches billions.
@SYaxJ2Ts: that’s all money that could come off the tax burden of working people, though it would probably be used to remove inheritance tax for the elite classes than remove USC for all.
@SYaxJ2Ts: It’s literally in the first few lines of the article how much increasing the entry to 40% “costs” the state… It is in part an increase in the labour force. It’s also from the extra taxes from people’s pay rises. An increase of 300k people in the labour force since 2019 doesn’t equate to 10.7 billion extra taxes. They would all need to earn 100k to account for that increase. If they’re all on the “average wage” of 45k thats just 2.7 billion of the 10.7 billion. But we can safely say the majority of those new people in the workforce are paid well below 45k (educated guess)… Extra income tax is coming from the pay rises people are getting with the cost of living. Bands need to be widened up to 50k at least, credits also need to be increased due to the massive inflation.
@SYaxJ2Ts: To further impress my point. A quick job for you. Take your current salary. Run it through a tax calc and add up how much IT, USC and PRSI you pay altogether. Now give your salary a 20% raise! Run the tax calc again and jot down the deductions. You got a 20% raise but what percentage did your deductions increase by?….. A lot more. If lots are getting COL pay increases then the govts tax take goes up massively….. Public sector have had about 20% in that time and I hear there plenty going in the private sector from other posters!…. Here’s the govt tax takes over the years for you to analyse https://x.com/colmkane83/status/1802940255848239299?t=MmJCsG0-Ql7HyzeBXzhk-Q&s=19
@SYaxJ2Ts: Also the entry into the 40% rate didn’t always stand at 42k. It has risen to that as a result of inflation and higher salaries. There has been massive inflation recently so it needs to be raised in a big way because the govt is getting more than their pound of flesh! These breadcrumbs they are giving us are an insult!
@SYaxJ2Ts: Sorry, just read your next message, it was a typo. Increasing the entry into the top band as per the opening paragraphs
@another one? what’s going on is the semi state sec: I fully understand the concepts of base, volume and rate when it comes to variance analysis – you are putting way too much emphasis on the impact of base increases. Salaries have not increased by that much, and even if they have, the associated cost to the state has also increased, firstly by general inflation, but mainly by the salary increases you refer to being paid to state employees – And then you just pick numbers out of the air about increasing bands to X with no overall budgetary context. And BTW, to the first point, your post said “increasing the top rate of tax” which means the % rate would,d cost 645M, whereas the article mentions increasing the “threshold” with a cost of 465M
@SYaxJ2Ts: Never do a typo? Easy one to figure out! You put the increase in tax take down to a bigger workforce dismissing that it’s tax from pay increases. PS have literally gotten 20% in that time. Govt get most of the PS pay increases back in taxes for those over 42k. Their spending has increased by over 30% since 2019 well outpacing inflation…. We’re still paying austerity taxes 16 years later. Only half a percent reduction on one USC so far!… If I earn 50k, get 20% increase to 60k, the govt gets 43% more tax from me (calc not incl pension)…. It’s really not hard to understand! But you keep thinking it’s just down to the 300k that have been added to the workforce who must all pay massive tax to raise 10.7b and that were being taxed appropriately after 20%+ inflation… Good man
@another one? what’s going on is the semi state sec: If in your mind the 300k people that have been added to the workforce compared to 2019 can raise the 10.7b in extra taxes last year compared to 2019 or anywhere near it is laughable. By the law of averages shouldn’t the 2.7 million workforce now raise 96.3billion for the tax man then?!?!…… You must be scratching your head as to how they only got 36.3 billion last year so?!?!
I still wonder why I pay 40% taxes. Healthcare is crap, roads are crap, schools aren’t great either. But the neighbourhood leeches can go on vacation 3 times a year in Spain, that’s probably the reason.
@Alex: The one’s going on holiday are probably doing a bit of side work, ye know what I mean..
@Alex: Stand for an hour in any Post Office on a Friday morning and you will see where its going – dole, rent allowance, family allowance, lone parent, fuel etc etc etc.
FG want to decrease tax, the shinners want to increase it. I know who I’m voting for
I’m just done with it all. TV license inspector knocking on doors the other day, rte staff getting lump sums when they retire FOR WHAT !!!
The new finance minister probably thinks he can solve the problems of Ireland but our embedded civil servants will soon put him straight( no pun intended).
He will have been given his list of words to speak…fiscal responsibility. GDP. Future proofing economy, stress testing banks etc and they will throw in a few quid for him to splash around in the budget to make him look good. Then we will have an election and it all starts over again.
An increase in the cut-off rate band from €42000 to €43890(€1890) would mean a yearly tax saving of €378 to anyone currently earning in excess of €42,000. This would equate to a weekly saving of €7.27…I’m sure the Government will introduce some little increases along the line in other areas like excise, levies etc etc
GDP debt 2009 170,000,000,000
GDP debt 2024 276,000,000,000
@Padraic O’ Sullivan: 276bn? Where are you pulling that figure from ? Our Net Debt as of Dec 2023 was approximately 200bn.
@Padraic O’ Sullivan: GDP debt?
@Padraic O’ Sullivan: Well it’s incorrect.
@Padraic O’ Sullivan: it’s all the one there’s still plenty of plonkers who will vote this shower back in. They’re taking on extra water to a sinking ship they’re asleep same as what’s running the country. They’ll defend the homeless figures,the homeless children figures it just goes on and on until one day those same people are effected maybe then the penny will drop but then again hard to know.
Why they don’t increase the tax credits instead? We have the same tax credit from several years ago. More progressive and fair for all
Increase credits and abolish usc completely as the banks are disgustingly profitable again, hit the banks with a new tax on profits.
The piece where 63% pay tax and USC isn’t individual it’s tax units, i.e., a couple who are jointly assessed for income tax is one tax unit. The data doesn’t, for some reason, break out this into numbers only uses percentages .
Irish Times headline is also a bit misleading
Waffle,waffle,waffle a few minor scraps to the public won’t help with fast inflating housing and hospital crisis. Can’t house what’s here ignore people who speak up and then riots. They’re scraps in the budget wont save them get them out, they’re driving the country right off the cliff out to sea and out of view altogether.
@Paddy C: And what’s the alternative? SF released their ” policy ” on immigration and, in a few words, amounted to “place immigrants in posh neighbourhood,” not an iota of how this will be done . Pure claptrap from a party that are high on rethoric and short on solutions.
They won’t solve any of the issues, without massive investment and where are they going to get that money? Only two options borrowing and increase national debt or raise taxes which figures above show that an individuals or a families earning more than €102,000 pay 63% of income tax and USC so are they, SF, going to burden the paye workers and sme owners with more tax after all SF believe 100k is wealthy.
You’re other points are nonsense and all the data is freely available for you to study.
@Paul O’Mahoney: Additionally, the majority will be very slow to accept a further erosion in their tax home pay and that’s what will decide the next GE , if SF are to dislodge the present government they need to get their policies out and they will need to costed , not on a one year basis but over the term of a government which is 5 years, with all the proper flows from tax revenue, expenditure both current and capital, the effects on economic performance .
Then they might have a less slight chance of getting into power, no more populist statements like this week it’s time step up.
@Paul O’Mahoney: salary of 100k is wealthy. They are the top 20% of tax payers
@Furious George – The Wasp: a tax unit is in the top 20% that could be 2 earners/ spouses and are jointly assessed.
Are you suggesting for a household it’s wealthy?
And those above €102,000 pay 63% of all USC and Income tax or €23.3bn with those beneath that paying the remaining 27% or €14bn approximately.
have your say