Most PAYE taxpayers will have to wait until March or April to get the benefit of any tax cuts announced in next month's Budget - even though the new tax year starts in January. The compensation will be in the form of lump sum tax refunds in pay packets in March or April - just before an expected general election in May and the start of the World Cup in June.
New tax measures will be announced in Budget 2002 on December 5th. Cuts in tax rates are not likely, but the Minister for Finance, Mr McCreevy, is expected to widen tax bands and increase some tax credits (deductibles), reducing next year's tax bill for many PAYE taxpayers.
However, the Revenue Commissioners have confirmed they will not be able to send out revised tax certificates to employers in time for the new tax measures to be applied to employees' wages and salaries from January.
Most employees will therefore pay more tax than they should in January, February and possibly March, and should then get a refund of these overpayments in March or April.
Revenue said there would be no interest on the refunds. Tax certificates sent out by the Revenue in recent weeks will have to be revised early next year to include the new Budget measures.
The problem revolves around the move to a calendar tax year from January. Up to now the Budget was usually delivered in December, but the tax year did not start until the following April 6th. This allowed plenty of time to reprogramme Revenue computers for the Budget changes, test the programmes and get new tax certificates out to employers and employees well before the start of the next tax year. Employers would then use the tax certificates to calculate the correct tax deductions to be applied to employees' pay.
In recent weeks, Revenue has been sending out interim tax certificates to about 2.1 million taxpayers - a copy of the certificate is automatically sent to employers. But it has told taxpayers that the certificates will have to be revised for the Budget changes and a new certificate will be issued in February/March.
