NEW measures to exempt those on the lowest incomes from the tax and PRSI net altogether are expected to form a central part of next week's Budget. Those on incomes of less than £80 to £85 will be exempted from the 5.5 per cent employee PRSI levy, while the level at which weekly income is relieved of income tax is expected to rise from £71 to about £73.
The Minister for Finance, Mr Quinn, is also expected to announce a substantial widening of the standard 27 per cent income tax band which will mean that less workers pay at the higher 48 per cent rate.
The old reliables of drink, cigarettes and petrol will again be targeted with an increase of 5p on a packet of 20 cigarettes anticipated. Alcohol is not expected to be subjected to such a rise but a 1p on the pint is expected.
However contrary to reports in other newspapers, there will be no increase in the TV licence fee announced on Budget day. While the issue was discussed in the light of RTE's request for additional income, it has been firmly ruled out of the Budget package. It may be discussed again by the Cabinet later in the year.
The PRSI allowance, introduced last year, exempts the first £50 of income from PRSI. As reported previously in The Irish Times, this is likely to increase to £80 to £85. Another key measure will be an increase in the income exemption limit below which no tax is paid. It is expensive to increase this, but it is likely to rise from just over £71 now to around £73 per week.
There is resistance in Government circles to any significant increase in fuel costs because of the knock on effect on the economy generally but it is believed that the cost of a litre of petrol will go up by about 1p.
The increase in child benefit will not be anywhere as dramatic as the rise introduced last year but it is expected that the Minister for Social Welfare, Mr De Rossa, has successfully argued for a modest increase of about £2 to £3 per month.
The final level will probably be agreed by Government Ministers tomorrow, along with full details of the tax package. Following intensive lobbying on behalf of carers, this section of the community is to benefit from increased tax allowances.
As reported earlier this week in The Irish Times, the income tax package of reductions under discussion amounts to £100 million - although this figure could increase as the final negotiations are completed - some £80 million will be spent on social welfare increases and £20 million is ear marked for reductions in corporation taxes. About £40 million may be raised by increasing excise duties.
Government ministers are likely to spend some of this on reducing employers PRSI. After that they must decide on whether to include a small reduction in the 38 per cent corporation tax rate or a special lower corporation tax rate for smaller companies.
Despite last night's friction between the Labour party and Democratic Left over whose policies to tackle unemployment will be included, the Government is close to agreeing a final package. Among the key measures are expected to be:
. A revamp of the Community Employment Scheme to involve more of the long term unemployed.
. New measures to oblige 18 and 19 year olds signing on the live register to engage in training and be available for employment, although there will be no cut in their cash benefit.
. An extension of the back to work allowance scheme which allows the long term unemployed returning to work to retain a portion of their benefits and new measures to allow them to retain some secondary benefits for a period.
. Tax and PRSI measures to increase the after tax income of low paid workers.
The Government parties have still to decide how to fund the expected £35 million cost of the unemployment part of the package and whether the £12.087 billion spending cap set before Christmas should be slightly breached.
As it becomes increasingly obvious that personal tax concessions in the Budget will be limited, Fianna Fail's finance spokesman, Mr Martin Cullen, called on the Minister to give taxpayers a "well deserved break". He blamed ideological clashes within Government for the reluctance to use this opportunity to reduce taxation on the PAYE worker.
"With the economy doing well, there is an onus on the Government to pass on the benefits of this growth to ordinary taxpayers who have borne the brunt of various austerity measures over the years and are way over taxed in Ireland," Mr Cullen said.
In their pre Budget submission, the Workers Party also urged the Government to implement tax reform as well as investment in social welfare, education and in local authorities.
