Tax credit limit of 4% increases PAYE burden

INDEXATION of tax credits and bands would have required the budget to increase them by 5%.

By limiting the adjustment to 4%, Finance Minister Brian Cowen has delivered an increase in the PAYE tax burden.

The minister has, however, also added insult to injury with his misleading claim that “we will protect people on average earnings from any liability to tax at the higher rate”.

On budget day itself the CSO released data showing that average earnings in industry came to €39,000 last June. Even if we exclude irregular bonuses from that total, the resulting more limited measure stood at €37,400, and will itself be at the €39,000 level by next June. Yet the budget has increased the standard rate tax band by a mere €1,400, to stall at a level of only €35,400 for the coming year. This means that anybody earning €3,600 less than the average in industry will already have been hit for the top rate of tax.

Manus O’Riordan

Head of Research

SIPTU

Liberty Hall

Dublin 1