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Tax paybacks take-home message: The more you earn, the more you gain

Published 13/10/2015

Finance Minister Michael Noonan has announced Ireland's Budget 2016
Finance Minister Michael Noonan has announced Ireland's Budget 2016

The more you earn, the more you gain was the big message from some analysts dissecting Michael Noonan's modest income tax paybacks.

Workers will benefit by hundreds a year but the higher earners are set to reap the best rewards as the burden from the crippling Universal Social Charge (USC) was significantly eased.

The new levies on income are 5.5% for wages from 18,668 euro to 70,000 euro; 3% for the next bracket from 12,012 euro to 18,668 euro; and 1% on the first 12,012 euro for anyone earning more than that.

Business chief said the cuts would take the marginal tax rate below 50% - a psychologically important breakthrough.

But some critics warned the new regime was more heavily weighted in favour of the better off with a single person on 25,000 euro a year 227 euro better off, compared to more than 500 euro for someone on 45,000 euro and 884 euro for someone on 70,000 euro.

Self-employed workers would also do well with an extra 936 euro a year on a 35,000 euro salary, or 1,456 euro on a 70,000 euro income.

Trade union Siptu said the budget contained positive measures that will see workers make the first real financial gains from a budget in almost eight years.

"The fact remains that the more you earn, the more you will gain," the union's researcher Ger Gibbons said.

Jimmy Kelly, Ireland Secretary for trade union Unite, launched a scathing attack on the revised USC levy, which he said disproportionately benefits the top 20% of earners.

"Half of all workers earn less than 29,000 euro," he said.

"They will see few benefits from the USC cuts - and the few euro extra they do get will be swallowed up by inflation and by increased charges for services which, in other European countries, form part of the social wage.

"Nor will these measures do anything for the 50% of those reliant on unemployment, lone parent or disability payments who suffer multiple deprivation experiences.

"While the partial restoration of the Christmas bonus will be welcomed by many struggling families, a budget is not just for Christmas and those families' incomes in 2016 will still be less in real terms than in 2012."

On the flip side, the Small Firms Association, chambers groups and Isme, the small business group, said the extra money in people's pockets will encourage spending and also help to ease wage demands from staff.

Mr Noonan insisted his reforms will take about 42,500 workers out of the USC net altogether, while he estimated that the changes would mean that more than 700,000 workers will not be liable for the levy next year.

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