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Lenihan Plans 3% Levy On Higher Earners

by Robert Lee,, London

19 November 2008

The Irish government is planning to impose a 3% levy on the nation’s highest earners to generate EUR60m of additional revenues for the treasury coffers.

On Sunday, Finance Minister Brian Lenihan announced that he would impose a “super levy” on all incomes over EUR250,000. The move is designed to offset lost revenues from the government's proposals to remove its planned 1% levy from those earning under EUR17,540.

The proposal will come before the Irish parliament, the Dail, when it meets to discuss the Finance Bill on Thursday. The Bill will also give effect to last month's budget, including the 1% levy for those earning above EUR17,540, and a 2% levy for those earning between EUR100,000 and EUR250,000.

Originally it had been proposed that a flat rate tax of 1% would be imposed on all workers earning EUR100,000 or less. However Lenihan amended the proposals to make the tax more progressive. The move came after trade unions complained that recent progress in achieving national pay agreements for low-paid workers had been undermined by the new proposals.

A U-turn is also expected from the government regarding a planned EUR10 air travel tax, although only in the smaller airports like Shannon, Cork and Knock, following complaints by domestic carriers, particularly Ryanair, the low-cost carrier, over the ‘unfair’ impact of the tax on the industry. Lenihan has increased the distance which falls under the classification 'short-haul' to reduce the burden of taxation for those flying between Ireland and the UK. As a result a EUR2 tax is proposed on flights shorter then 300km, and EUR10 thereafter.

Also expected in the Finance Bill is a 2% hike in inheritance tax to 22%.

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