Thursday, May 14, 2009
The OECD has published the current year edition of Taxing Wages. The overall conclusion is one of a small reduction in taxes on individual wage earners in 2008. Given the fiscal stimulus packages in numerous countries since the beginning of 2009s, this information has more historical value than current relevance.
For a single-earner married couple with two children on average earnings, the tax burden increased by 3.4 percentage points to 5.5% in Ireland in 2008. With the changes announced in the Supplementary Budget, this figure is going to increase substantially for 2009.
Further information on Taxing Wages is available here
Thursday, May 14, 2009
The Second Stage debate of the Finance Bill 2009 took place on Tuesday 12 May and Wednesday 13 May. The Minister for Finance outlined the measures in the Bill. His comments provide insight into the motivations for some measures which have been introduced.
The following are some of the Minister's comments, together with the section to which the comments refer:
Income Levy
"The composite rate provision, applying to 2009, included in this section is intended as an anti-avoidance measure which prevents individuals who can control their income from front-loading their yearly income to avoid the higher rates."
Restriction on interest relief for rented residential property
"I am introducing this measure at a time when mortgage interest rates are at historical lows and the repayment burden on investors has been reduced significantly. The interest component of repayments is now less than 50% of the levels that obtained as recently as two years ago. I am aware that rents are falling after a number of years of strong growth. This fact was taken into consideration when I framed the supplementary budget and decided to reduce rather than abolish this relief."
Dealing in residential development land
"The incentive rate is being abolished in recognition of the fact that the relief has served its stated purpose of releasing development land. The measure also introduces new arrangements for dealing with losses which ensures that where profits were taxed at 20%, losses cannot be relieved at 41%. Any such loss will now be converted into a tax credit valued at 20% of the loss and can be offset sideways against income tax which would otherwise be payable on the person's other income."
Mid-Shannon Tourism Infrastructure Scheme
"It is my understanding that a number of significant projects are in the pipeline which have not yet been submitted formally to the board for approval. A feature of the projects identified is that they are nearly all being promoted by experienced tourism operators who have the capacity to create sustainable businesses with a clear customer focus, rather than being solely driven by investors. If the existing deadline for submission of projects to the board for certification is retained, none of these projects will be able to proceed."
Stamp Duty - Trade-In Houses
"The purpose of the scheme is to give impetus to the residential property market by freeing up the overhang of completed but unsold new property, with consequential impact on employment."
Decrease in CAT thresholds
"Although this is the first time that the CAT tax-free thresholds have been reduced, I consider this reduction is justified in light of recent economic conditions. The tax-free thresholds remain generous."
General comment on tax rates
"The rates of deposit interest retention tax, capital gains tax and capital acquisitions tax are all now 25%. This is part of the Government's base broadening measures and ensuring that all forms of income contribute to the fiscal correction. The increases in the taxation of capital and savings will ease the taxes which would otherwise have to be imposed on labour and consumption."