The National Recovery Plan – List of Tax Changes

The National Recovery Plan 2011-2014 has just been announced and is now available online

The Taxation Measures in the Plan are outlined on pages 89-103 of the document.

Page 89 lists the following ‘Key Messages’ of the Plan’s tax measures.

• Revenue measures will provide one third of the budgetary adjustment.
• 40% of total revenue measures will be adopted in 2011.
• The income tax system is unsustainable if 45% of tax units pay no income tax.
• Radical base broadening across the tax system is needed.
• All taxpayers must contribute.
• By overhauling tax expenditures, those that can afford to pay more will pay more.
• Tax policy emphasis must be on sustainable structural reform.
• Funding of local service provision must be addressed.
• The Government will maintain the 12½% rate of corporation tax.
• Supports for small and medium enterprises will be reformed.

The document proceeds to announce the following changes

Tax Credits and Bands

Tax credits and bands are to be cut by a total of 16.5% over the 4 years covered by the plan.

Pensions Tax Relief

• The rate of income tax relief on pension contributions will remain unchanged in 2011, but will be cut from 41% to 34% in 2012, to 27% in 2013 and 20% in 2014
• The existing PRSI and Health Levy relief on employee pension contributions will be abolished from 2011.
• The annual earnings cap for pension contributions eligible for relief will be cut from €150,000 to €115,000 in 2011.

Tax Reliefs

A range of Tax reliefs and exemptions are to be abolished in 2011. These are:

• Tax exemption for patent royalties.
• The investment allowance for machinery and plant and for exploration expenditure.
• Approved Share Options Scheme.
• BIK exemption on employer provided childcare.
• The accelerated allowance for capital expenditure on farm buildings for pollution control.
• The tax exemption for payments to National Co-operative Farm Relief Services Ltd.
• Income tax relief for rent paid for private rented accommodation.37
• Income tax relief for trade union subscriptions.
• Income Tax Age Credit (phased over 4 years).
• Income Tax Age Exemptions (phased over 4 years)

The following measures will also be adopted:

• PRSI, Health and Income Levy charge will now apply to Approved Profit Sharing,Save-As-You-Earn,Unapproved Share Options and Share Awards Schemes.
• Artist’s exemption from Income Tax will now be restricted to €40,000 earnings.
• Ex-gratia termination and pension lump sum payments in excess of €200,000 will now be taxed.

VAT

The standard 21% rate of VAT will increase to 22% in 2013 and 23% in 2014.

Property Tax

A ‘Site Value Tax’ will be introduced in 2012, in the form of an interim fixed “household charge” of €100 per annum in 2012, and a full charge based on property value from 2013.

Carbon Tax

Carbon taxes will double over four years.

Capital Taxes

• The 25% rate of Capital Gains Tax will change to a new system in 2012, with differing rates for different levels of gains.
• The current tax-free thresholds for Capital Acquisitions Tax (CAT) are to be cut.
• Current reliefs and exemptions from CGT, CAT and Stamp Duty ‘will either be abolished or greatly restricted’.

Corporation Tax

• There will be no change in the 12½% rate of corporation tax.
• The Business Expansion Scheme(BES) is to be reformed.