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Kites, caution and a cracking report from the ITI

Posted: October 02, 2015 Comment: 0 Read: 493 times
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As Budget 2016 takes over the talk in the media, watercoolers and pubs, the Government has been pushing out the press releases on what might be in store for October 13 and beyond. Official bodies and state agencies have also weighed in, while lobbyists from all sectors have been airing their varied cases.

This comes amid a torrent of good news stories about the economy – from the media and officialdom alike. Reports of overflowing State coffers, continually upward revisions to growth forecasts, and announcements of capital expenditure projects worth tens of billions would make you think Charlie McCreevy was about to appear on Six-One news.


Countering all that optimism, however, is the ongoing issue of debt, volatile geopolitical conditions and justifiable warnings that any sudden ripple in the world of finance would send the quickening ship of Ireland headed straight back to the doldrums.

And the Economic and Social Research Institute says that the Government should avoid the temptation to open the wallet too wide, despite the pain the nation has endured since 2008. Anything more than a neutral budget would put the economy at risk of overheating yet again, the think-tank says.

In the recently published ‘Budget 2016 – The Tax Story’, the Irish Tax Institute offers a measured assessment of the options available to the Government as it juggles these conflicting narratives, with just months – or perhaps weeks – to a General Election.


The Irish Tax Institute identifies the Universal Social Charge (USC), Income Tax and Differences between self-employed and employees as “Ones to Watch” this year. On USC, the Institute outlines a range of options available to the Government, in terms of moving the entry band and/or realigning the 1.5% band.

Depending on the options, beneficiaries range from the 80,000 taxpayers currently paying USC at the top rate, to all 1.74m taxpayers who pay USC. The most generous option, according to their calculations, would come at an estimated cost to the Exchequer of €82m, the Institute says.

Another possibility open to the Government is a reduction in the USC rates from 7% to 5%, which would be welcomed by the 53% of taxpayers earning more than €17,575, the Institute says. Should the Government instead reduce the 8% rate to 7%, it would be the 202,000 taxpayers earning more than €70,044 who would be celebrating instead.


Other areas flagged by the Irish Tax Institute include increasing the 40% income tax band by €1,000, which would free tens of thousands from the heaviest burden and encourage people to take on new or extra work.

It outlines possible action on the gaping differences between the ways employees and the self-employed are taxed, such as:

Introducing an earned income tax credit of €1,650, bringing it in line with PAYE workers;

Eliminating the 11% USC rate / 3% USC surcharge for the 28,700 taxpayers who pay it.

The report also gives an excellent presentation of the wider economic context, the ‘Global War on Talent’ self-employment and entrepreneurship. You can read the full publication from the Irish Tax Institute here.

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