High-income workers, first-time house buyers and non-smokers will do the best out of Budget 2007, which also included improvements for pensioners and carers, writes Laura Slattery
The cut in the top rate of tax from 42 per cent to 41 per cent and the widening of the standard rate tax band by €2,000 to €34,000 for a single person and €43,000 for single-income married couples were among the major tax changes announced.
The personal tax credit also increased by €130 to €1,760 for single people and by €260 to €3,520 for married couples, while the PAYE employee tax credit will go up by €270 to €1,760.
From next April, child benefit will increase by €10 a month, taking the rate of payment to €160 a month for the first and second child and €195 for the third and subsequent children.
From April, a two-income married couple with two children earning a combined €80,000 a year will see their net monthly income increase by more than 3 per cent, from €5,504 to €5,674 (assuming their income is split equally).
Yet according to figures from PricewaterhouseCoopers, if the couple has the lower combined income of €40,000 their income will increase by just over 2.5 per cent.
As expected, the €1.4 billion welfare package includes significant increases in State pensions, which bring the value of the contributory State pension to €209.30 a week and the non-contributory State pension to €200 a week.
The increases benefit more than 400,000 pensioners.
The qualified adult allowance, which is mostly paid in respect of women with no PRSI record, will increase by €23 next year to €173 a week, and will be paid directly to the qualified adult.
This is the first step of a €60 million commitment to bring some 35,500 qualified adults up to the same rate of payment as the non-contributory State pension within three years.
However, Age Action described the Budget as a missed opportunity to help the poorest pensioners.
The organisation said some 37 per cent of pensioners who receive the non-contributory pension, a total of 84,000 people, will still fall below the poverty line, which it placed at a weekly income of €203.55.
"Many older voters and their families will be underwhelmed by this package," said Age Action spokesman Eamon Timmons.
However, Age Action welcomed the increases in payments to carers.
Changes to the means-tested carer's benefit will mean that older people will be able to claim their pensions and up to half the rate of the carer's allowance. Previously carers could not claim the carer's allowance if they were in receipt of another social welfare payment.
The Department of Social and Family Affairs said this measure would boost the income of 18,000 carers by up to €109 a week.
The respite care grant will increase by €300 to €1,500, which will benefit around 40,000 carers.
The rate of the carer's allowance and carer's benefit payments will go up by €18 and €20 respectively, while the means test for the carer's allowance and the earnings threshold for the carer's benefit will increase.
The lowest rates of social welfare will increase by €20, bringing the lowest adult rate to €185.80 a week.
The three levels of child-dependant allowances, the key allowance aimed at children living in poverty, will be combined into a new single-qualified child allowance of €22 a week.
Ireland's largest children's charity, Barnardos, welcomed the changes to the child-dependant allowance and child benefit, but said the Minister could have gone further to make a real difference to the lives of 100,000 children living in consistent poverty.
Barnardos chief executive Fergus Finlay said lone-parent families, one of the key groups likely to be caught in poverty traps, would be better off by €3 a week as a result of the changes to the child-dependant allowance.
The increases in the Back to School Clothing and Footwear Allowance from €120 to €180 in respect of children aged between two and 11 and from €190 to €285 for older children were also modest and would do little to help children facing educational disadvantage, said Mr Finlay.
Other Budget measures include increases in the widowed parent grant and the bereavement grant.
Some 274,000 households who receive the fuel allowance will see the payment increase by €4 to €18 next year.
As well as increases to the personal tax credit, the PAYE employee credit and the age tax credit, Mr Cowen announced increases to a range of other special credits.
The widowed person's tax credit will increase by €50 to €550, while the widowed parent's tax credit will be €650 higher in each of the five years after the year of bereavement for which the tax credit is granted.
The tax credit for people who care for an incapacitated child will double from €1,500 to €3,000, while the blind person's tax credit will increase by €260 to €1,760 for a single person and double that rate for a married couple.
The tax credit on rent will increase by €30 to €360 for single people aged under 55, while people aged 55 and over can claim a tax credit of €720, up €60.
The threshold for health levy payments will increase from €440 to €480 a week, meaning workers who earn €480 or less per week will be exempt from the levy, which is charged at a rate of 2 per cent.
However, Mr Cowen announced that the levy will increase to a rate of 2.5 per cent on incomes exceeding €1,925 a week, which works out as income of just over €100,000 a year.
Mr Cowen's decision not to touch the stamp duty regime means property hunters will not be able to reduce their purchase costs.
But once they have got on the housing ladder, most first-time buyers will see the cost of their mortgage reduce by €66 a month as a result of the doubling of the ceiling on mortgage interest tax relief.
This tax relief is now worth up to €133 a month for the first seven years of the mortgage, after which it falls to a maximum of €50 a month.