TaxSource Total

Here you can access summary of the key current tax developments in Ireland, the UK and internationally as reported by Chartered Accountants Ireland

The report of key tax developments are displayed per year, per month, by Ireland, the UK or International and by report title

Income Tax

The Commission on Taxation report recommends a number of changes to the income tax system, among the main recommendations are: the introduction of a single system which collects tax on income, a three rate band structure, an extension of the current employee tax credit to proprietary directors and the self employed and a change to the limit on the use of specified tax reliefs and exemptions by high income earners.

The Commission examined the option of bringing together the current four systems which collect tax on income, namely; income tax, PRSI, health levy, and the income levy, into a single tax system. The results of the examination suggested that in the event of integrating all four systems, the scale of marginal tax rates would be likely to increase with possible negative perceptions.

The Commission recognises that the health levy now equates to a type of tax and recommends integrating it into the general tax system when fiscal conditions improve.

The report recognises the merits of a third rate of income tax which should reflect the need to keep taxes on labour low and marginal rates competitive. The report is vague as to how a third rate should be implemented, however it is envisaged that a third rate will involve an upward or downward adjustment of the current rates and would be introduced above, below or between the adjusted rates.

The Commission recommends the extension of the PAYE tax credit to the self employed and proprietary directors. Whilst appreciating the significant cost implications of its proposal, the replacement of the PAYE tax credit with an ‘earned income credit’, would recognise the incremental costs of working as compared with a taxpayer with investment income only.

The use of specified tax reliefs and exemptions by high earners should remain part of the tax system as per the report. It is proposed that all individuals who earn over €250,000 in a tax year should pay an effective rate of 20%. The graduated application of the rules should continue and apply to individuals earning between €200,000 and €250,000.