Budget 2013 Income: No income tax hike but wealthy feel pain

Budget policies in pensions and property tax and proposed increases in capital gains, capital acquisitions and the Dirt tax are all aimed at targeting the wealthy.

Leaks prior to the budget had signalled the Government’s intentions not to alter the headline welfare and income tax bands.

It is believed that Labour wanted a higher rate of income tax for higher earners, with Fine Gael implacably opposed to such a move.

There was no change to the income tax rate but there were a number of changes to other taxes aimed at generating more revenue from the wealthy.

The marginal rate of tax relief on pension contributions remains unchanged at 41%, but tax relief on pensions is capped at €60,000. According to the consultancy firm, Mercer, the marginal tax rate on pensions over €60,000 is now 70% when the universal social charge and other taxes are included.

The PRSI charge has been rolled out to income on property and other forms of investments. &The capital gains tax, the capital acquisitions tax and the Dirt tax on bank deposits have all been increased from 30% to 33%.

The property tax will be applied at 0.18% on properties with a value up to €1m and 0.25% on properties over €1m.

Declan Dolan, head of the firm, DCA Accountants, says many of the measures are aimed at discouraging passive investment.

“The Dirt tax in particular is aimed at discouraging people who may have received large redundancies payments or other lump sums from keeping them on deposit.”

At a press conference following the budget, Minister for Finance Michael Noonan said the decision not to increase the marginal rate of taxation was made following consultation with the foreign multinational sector.