Few benefit as minister rules out tax cuts across board

PEOPLE who stay at home to mind children and the self-employed were the main gainers from income tax changes in the Budget.

But the vast majority of income-tax payers lost out.

The failure to increase the income tax bands means PAYE workers who get a pay rise will pay more tax.

Tax experts said that this will have the effect of more income tax being paid by the majority of employees.

Finance Minister Paschal Donohoe cited the likely prospect of a no-deal Brexit for his failure to offer any tax cuts.

“I will not commit to acrossthe-board personal tax cuts at this time of economic uncertainty as to do so could potentially undermine the sustainability of our public finances,” he said.

“The unfunded tax cut of today is the unwelcome tax increase of tomorrow.”

Mr Donohoe said it was important to avoid a situation in which decisions made this year might be reversed in the future.

“I do not want to go down that path again. Care is needed,” he added.

The self-employed will gain from the raising of the earned income tax credit.

They will be able to earn an extra €150 next year before paying tax, as the tax credit goes to €1,500.

For stay-at-home parents there was also a tax benefit.

This is because the home carer tax credit rises by €100 to €1,600. The credit can be claimed by those who care for children, the aged, or an incapacitated person in the home.

They are allowed to work part-time outside the home, subject to certain income limit, and still get this tax credit. Since 2015, this tax credit has almost doubled.

In the last few budgets the higher rate tax band has been increased to reduce the amount of people paying tax at the higher rate.

Single-income earners on more than €35,300 pay tax at 40pc. The failure to increase the amount you can earn before hitting the higher tax rate means anyone getting a pay rise will pay more tax.

Eoghan Quigley, tax partner at KPMG, said the majority of PAYE workers will not be any better off as a result of the Budget as, unlike previous Budgets, the tax and USC rates remain unchanged.

“The main winners are self-employed workers who will see the earned income tax credit increase by €150. The increase in this credit has reduced the gap between self-employed and PAYE workers in relation to the tax-credit differential,” he said.

Low-paid workers were expected to benefit from a rise in the minimum wage, but the fact that no changes were made to the PRSI thresholds for low-income earners means this is now unlikely.

Policy officer with the Irish Congress of Trade Unions Laura Bambrick questioned why the self-employed have gained when low-income people did not.