The Government will top up savings by 25 per cent as part of a radical scheme aimed at encouraging people to put more money aside.
Under the plan, which will be introduced at the committee stage of the Finance Bill by the Minister for Finance, Mr McCreevy, the Exchequer will contribute a maximum of up to £50 a month to individual accounts. As expected, the Bill will also provide for a new tax regime on share options to help companies recruit and retain staff.
But in a surprise move, it abolishes plans to penalise landowners who fail to put sites zoned for residential development on the market.
The Economic and Social Research Institute (ESRI) warned last night that this move could push up land prices this year. But Mr McCreevy said the threatened imposition of a 60 per cent capital gains tax - which is now being dropped - had done its work.
"Land has come on stream. It has served its purpose," he said.
The Minister was enthusiastic about the impact of his new savings scheme, which he said would take demand out of the economy as well as providing an incentive for people to provide for a rainy day.
The Minister could give no indication of how much the scheme would cost the Exchequer because it was dependent how many people availed of it.
However, the upper limit is estimated by Department of Financial officials at not more than £200 million.
For the same reason, the Minister could give no indication of its likely impact on the consumer price index, but he added: "Fiscal policy in this economy does not have much impact on inflation."
All financial institutions will be able to provide the new accounts, which will enable savers to put money in deposit accounts as well as equity investments.
There will be no DIRT tax, but all gains - whether through capital appreciation or interest payments - will be subject to a 23 per cent tax on redemption. The Government contribution and the money lodged will not be subject to tax.
All individuals over the age of 18, whatever their tax status, will be able to have an account, with the maximum investment limited to £200 a month. The minimum investment is £10.
The Tanaiste, Ms Harney, said the savings scheme represented a powerful and innovative initiative.
"The savings plan will give a great boost to people's ability to save, by returning taxpayers' money to them and by giving equal benefit to those on modest and fixed incomes," she added.
But Fine Gael's new spokesman on finance, Mr Jim Mitchell, said the proposal had all the hallmarks of being an ill-conceived half-measure. "The provisions proposed seem to be riddled with difficulties and have the potential to be a bureaucratic nightmare and provide plenty of opportunity for creative accounting and money switching. It is likely the banks will be the biggest winners."
Other initiatives in the Finance Bill include a cut in the taxation rate on share-option schemes if at least 70 per cent of the options are available to ordinary employees. There will be no limit on the value of the options being exercised.
According to Mr McCreevy, this will help staff retention and boost Ireland's competitive position in attracting employees.
Labour's finance spokesman, Mr Derek McDowell, said the proposals fell far short of what was required.
But the measure was welcomed by business groups, which said it would help in the recruitment and retention of staff. However, small firms said it discriminated against them.
Charities and institutions such as schools and hospitals will benefit. Tax breaks at the marginal rate will now be available on all financial donations, though not for services provided.