Income Tax Changes

Tuesday, April 07, 2009

The income levy rates have doubled and the exemption threshold on which the income levy will apply will be reduced from €18,304 to €15,028.

Income Levies

The income levy rates have doubled and the exemption threshold on which the income levy will apply will be reduced from €18,304 to €15,028. This means that taxpayers with gross income over €15,028 will face the following income levies rates:
2% up to €75,036
4% from €75,037 to €174,980
6% on income over €174,980

For an earner with €75,000 gross income, the rate increase will represent a jump from €750 pa to €1,500 pa in their income levy liability.

The income levy was always the most likely weapon of choice for the Government to use to help plug the large tax revenue deficit realised in Quarter 1 of 2009. This is down to that fact that the income levy involves the least administrative problems to actually implement from 1 May onwards, with no requirement to issue an amended Certificate of Tax Credits and Rate Bands and hence no major payroll upheaval. It also takes a cut from the taxpayer’s gross income before relief for any capital allowances, losses or pension contributions and therefore has the ability to yield the maximum tax revenue.

There are no details in the budget release to indicate if the income levy exemption threshold for taxpayers over 65 years of age will be affected. Under its first incarnation this year, over 65s are not liable to the income levy if income is €20,000 or less for a single individual or €40,000 or less for a married couple where at least one person is 65 years or more.