THE GOVERNMENT is expected to take steps to ensure that redundancy payments paid since January are excluded from the effects of the higher levies introduced in the emergency Budget by the Minister for Finance, Brian Lenihan.
The issue dominated Fianna Fáil TDs’ thinking yesterday after it emerged that the department was preparing to stop the self-employed from escaping the new 4 per cent and 6 per cent levies on higher incomes by paying themselves in advance of the May 1st deadline for the introduction of the new rates.
While no final decisions have been made, senior Government figures acknowledge that it was never intended “to drag” redundancy payments paid out to people since January into the higher levies, though no exceptions can be made for those paid afterwards.
The need for a review of the impact of budgetary changes on redundancy payments by the Government was further underlined last night with confirmation that health levies which were doubled in the Budget will also adversely affect people who took redundancy in the first four months of the year.
While enabling legislation for the health levies, which will now be charged at rates of 4 and 5 per cent depending on income, has yet to pass through the Oireachtas, a spokesman for the Department of Finance confirmed that it was intended that they would operate in the same way as the new, higher income levies.
Meanwhile, efforts are also expected to prevent “front-loading” of pay to the self-employed by the insertion of a clause in the Finance Bill that would allow the Revenue Commissioners to refuse to accept any payment practice in the first five months of this year that was significantly out of line with past practice in the same five months of previous years.
This would have the benefit of not interfering with bonuses paid normally to some taxpayers earlier in the year.
The Government came under sustained pressure yesterday from Opposition parties. Labour spokeswoman Joan Burton said any attempt by the Government to backdate the higher rates of income levy to the beginning of the year “would be morally unjust and legally dubious”.
She said it would be “quite dishonest of the Government to now try and renege” on the commitment given by the Minister to introduce the new regime from May 1st. It should be possible, Ms Burton said, to include anti-avoidance provisions in the Finance Bill to pre-empt front-loading without hitting taxpayers generally.
Fine Gael’s Richard Bruton condemned what he called a “sneaky measure”.
“It’s bad enough that thousands of people are losing their jobs every month, but for the Government to go chasing after their hard-earned redundancy payments by applying new taxes retrospectively is scandalous,” he said.
Mr Lenihan will publish the Finance Bill next month but changes to the legislation could be made at any time between then and its concluding passage in the Seanad late in the month.
