Budget day tax and social welfare changes will be introduced in January from 2002, the Minister for Finance Mr McCreevy has announced. The move which will cost about £85 million, brings the tax and calendar years into line and will mean the Budget will be presented earlier in the year.
It will help taxpayers and social welfare recipients as they will benefit from increases earlier. Any tax increases will also be implemented earlier. Under the current system, tax changes introduced in the Budget, become effective in April and social welfare changes in July, although these have been brought forward to April from next year.
According to Mr McCreevy, using the calendar year will put the collection of income tax on a "more rational and simplified basis and combining this with the euro changeover will allow the necessary IT changes to be made in one go". Tax experts also pointed out that the move could have implications for non-resident taxpayers, such as Dr Michael Smurfit, or Mr Dermot Desmond who generally have to spend 183 days in a year out of the State. "It is possible this could mean some of these individuals could be caught and inadvertently become resident," he said.
From January 1st 2002, the tax year will run from January 1st to December 31st. As a result the tax year in 2001 will only be nine months long from April 6th to December 31st. Allowances for the period will be on a nine-month basis and annual allowances will be scaled to 39 weeks.
The PRSI ceiling will not be adjusted and social insurance benefit entitlements based on contributions in that year will be fully protected.
Payment and filing dates for the self-employed will also change, leaving less time for people to prepare their returns. Preliminary tax will have to be paid by September 30th in the year of assessment, while files will have to be returned by June 30th the following year and any balances paid by September 30th.
According to Mr Michael Mullins, president of the Institute of Taxation, this will cause difficulties for many taxpayers and tax practitioners.
