From PRSI increases to VAT on processed foods, 10 ways the Commission’s tax proposals would affect your life

The Commission of Taxation and Welfare’s newly released 500-page report makes 116 recommendations to raise taxes.

t has called for “significant” increases in property and wealth taxes, VAT hikes, congestion charges in urban areas, increased PRSI and the phasing out of private health insurance premium concessions.

Chair Professor Niamh Moloney said the overall level of tax measures as a percentage of national income must increase over the next 10 to 15 years.

Independent.ie examined 10 key ways the proposals could impact the public if implemented.

1. Processed foods

One of the Commission’s most controversial proposals is that there should be a tax on highly processed foods to discourage people from buying them.

This would mean family favorites like pizzas, chicken nuggets and fries would be subject to excise taxes. There is currently no VAT on groceries.

No rate or level is specified that should apply to such a tax, which is left to politicians to decide.

The Commission recommends: “The government should reserve the right to levy taxes on the consumption of ultra-processed foods to support its reformulation policies.”

2. Inheritance Tax

The commission said there should be a “significant” reduction in the amount of money parents can leave their children tax-free.

He recommended radically lowering the exemption limit for inheritance tax over the next few years.

Under Capital Acquisitions Tax (CAT) rules, a child can inherit €335,000 from their parents before paying 33 percent tax.

In 2009, a child could inherit or be gifted €542,544 from their parents before having to pay taxes, the current tax rate being 22 percent.

Taoiseach Micheál Martin said there was “no appetite” within the government to change inheritance tax rates.

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Taoiseach Micheal Martin. Photo: PA

3. Current

Despite calls from homeowners and businesses across the country for the government to tackle rising energy bills, the commission has recommended introducing a new electricity tax over time.

It does not set a rate for a new tax on electricity consumption, but outlines the principle of applying a new tax.

The Tax Advisory Board said it “recognizes the need for the Treasury to generate additional revenue from the electricity tax in the medium to long term (after 2030) to replace fossil fuel revenue.”

Commissioners said any increases should be carefully timed and clearly signaled in advance, and should not act as a disincentive to the use of renewable electricity sources in carbon-intensive activities.

4. Value Added Tax Rates

The expert group also advised the government to abolish reduced VAT rates.

The standard sales tax rate is 23 percent, but a rate of 13.5 percent is paid for construction and building services, agricultural contract work, short-term car rentals, cleaning and maintenance services.

The energy crisis has led to a temporary reduction in VAT on electricity and gas from 13.5 percent to 9 percent. Abolishing the reduced rates could mean lowering the overall standard rate.

5. Road users

A road user charge was also proposed.

“The Commission recommends the medium-term introduction of distance, location and time-based road user charges,” says the report.

Technology would be used to meter road use and there should also be congestion charges in urban areas.

6. Local Property Tax

The commission has stated that local property tax (LPT) revenue “needs to account for a significantly larger proportion of total revenue through the adjustment of property tax rates and possibly through an adjustment of valuation bands”.

According to the report, the ability of local authorities to lower the property tax rate should be eliminated.

A surcharge is to be introduced for vacant properties and a property value tax is to be levied on all properties not subject to property tax.

7. Help buy the scheme

Another suggestion that could prove wildly unpopular with first-time buyers is getting rid of the Help-to-Buy program.

The Commission has argued that this creates distortion and a false incentive.

The system is seen by the expert group as regressive as previous research has shown that many of those using it would be able to post a home security deposit even if the system did not exist.

8. PRSI

The PRSI rate for the self-employed should increase over time to 11.05 percent from the current 4 percent, according to the commission.

The move would affect up to 331,000 people who are self-employed in the state, including farmers and tradespeople.

She calls for more fairness in the tax system by abolishing the current preferential tax treatment for pensioners.

This would involve ending the current exemption from PRSI for people aged 66 and over for any income they earn other than their welfare payments. The PRSI exemption applied to supplemental retirement income should be abolished, the report said.

9.USC

It also recommended that age should not be a factor in determining the income tax rate and USC an individual pays.

Currently, those age 70 and older with income of €60,000 or less pay a reduced USC rate, while a number of income tax exemption limits and credits are available to those over 65.

The report recommends that the amount of USC an individual pays should be based solely on income level and not other criteria.

10. Child Benefit

On the social welfare side, the Commission advises keeping the child benefit but not taxing it. She calls for a staggered increase in child benefit rates for low-income households.

She demands that working family allowance applies to all households and not just to households with children.

This is to deal with distortions in the labor market and ensure that there are no barriers to accepting paid work baked into the welfare system.

After the report was released this afternoon, Finance Minister Paschal Donohoe said the government would “seriously examine” the proposals but would not act until the budget was approved.

https://www.independent.ie/news/from-prsi-hikes-to-vat-on-processed-foods-10-ways-commission-on-taxation-proposals-would-affect-your-life-41989925.html From PRSI increases to VAT on processed foods, 10 ways the Commission’s tax proposals would affect your life

Fry Electronics Team

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