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Ireland Cuts Individual Income Tax Burden In 2015 Budget

by Jason Gorringe, Tax-News.com, London

16 October 2014


Irish Finance Minister Michael Noonan has announced plans to cut the marginal rate of tax for individuals and has set out plans for reform of the corporate tax regime, in a tax-heavy 2015 Budget that is aimed at shoring up Ireland's economic recovery.

Signalling an end to austerity Budgets, Noonan told Parliament on October 14: "The progress made over the past three years in improving public finances, increasing economic growth, and creating jobs, means the Government can focus on reforming the income tax system in a manner that positively contributes to and strengthens that recovery. These reforms will give confidence about the future and create the opportunity for businesses to grow again."

Noonan said that income tax changes will make it more attractive to work in Ireland. The marginal tax rate of 52 percent will be lowered "in a manner that maintains the highly progressive nature of the Irish tax system." Changes will be introduced over a number of budgets, with the 2015 Budget lowering the marginal rate from 52 percent and 51 percent through changes to income tax rates and thresholds. In particular, the top rate of income tax is to fall from 41 percent to 40 percent and the Universal Social Charge (USC) will be restructured.

For lower income persons USC rates will fall and the exempt threshold will rise to EUR12,012 from EUR10,036. Those on higher incomes will see rates restructured and the rate of USC on self-assessed income over EUR100,000 will rise by 1 percent to 11 percent.

Further measures to lower the income tax burden will feature in next year's Budget, and also in subsequent budgets if the Government is re-elected, Noonan said.

A key announcement is the continuation of the Special Assignee Relief Programme (SARP), which supports Irish employers to compete with other countries to attract talented individuals.

While retaining the 12.5 percent corporate income tax rate and a number of other key tax incentives for businesses, a report called "Competing in a Changing World: A Road Map for Ireland's Tax Competitiveness" was published alongside the Budget, setting out plans to alter Ireland's tax regime in particular for multinationals. Included are plans to prevent the use of "Double Irish" arrangements by no later than 2020.

Noonan said: "These measures will enhance Ireland's corporate tax regime and align it with best practice internationally. It will ensure that Ireland continues to be the home of the best and most successful companies in the world. It will attract and retain companies with real substance offering real jobs."

Welcoming the Budget, the CEO of business group Ibec, Danny McCoy said: "The Budget will add momentum to the recovery and sends an important signal to taxpayers and the international community that our era of austerity is over. Ireland is again on the front foot."

"Income tax cuts will boost economic activity and make it easier for companies to create jobs. The high marginal tax rate and the early entry point puts Ireland way out of line internationally and is a major disincentive to work, doing overtime or taking a promotion. The reduction to the marginal rate, reform of the tax bands, and the plan for more reductions to come will make Ireland a more attractive place to live and work."

TAGS: individuals | capital gains tax (CGT) | Budgets | tax | business | Ireland | tax incentives | budget | corporation tax | tax thresholds | multinationals | tax planning | transfer pricing | tax rates | stamp duty | tax breaks | tax reform | individual income tax | Employment | Tax

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