Minister for Finance Brian Cowen introduced a series of tax cuts worth some €1.25bn as part of Budget 2007.
The standard rate income tax bands, currently standing at €32,000 for a single person and €41,000 for couples, have been increased significantly by €2,000 for single/widowed persons and €4,000 for married couples on two incomes.
Minister Cowen said increases in income tax credits would take a further 88,000 workers from the tax net to bring to 846,000 (38.2 per cent) the total number of number of workers who will be outside the tax net in 2007.
The existing employee credit of €1,490 is being increased by €270 to €1760. Single persons will see an increase of €130 to bring them from €1630 to €1760. Married persons will see their tax credit increase from €3,260 to €3,520, an increase of €130.
The additional one-parent family credit inceases by €130 from €1,630 to €1,730.
In the first cut in income tax rates for six years, the Minister announced a reduction of the top rate of tax by 1 per cent to 41 per cent.
Widely anticipated after better-than-expected Exchequer tax returns last month showed an additional €2.5 billion in the State's coffers, the Minister said the income tax cut would cost €125m in 2007 and €186m in a full year.
While the move fails to fully meet the commitment to bring the top rate down to 40 per cent during the lifetime of the current Government, Minister Cowen told the Dáil that if re-elected next year - and providing the country's current economic strength is maintained - the Government will cut the top rate to 40 per cent in next year's budget.
The threshold for the health levy sees a weekly of €40 from €440 to €480 representing a yearly increase of €2,080 from €22,880 to €24,960.
Widowed persons will see their €500 credit allowance increase by 10 per cent to €550 and widowed parents will receive greater support with an increase of €650 euro per year for each of 5 years after the death of their spouse.
Carers with incapacitated children will see a doubling of their €1,500 yearly allowance to €3,000 per year and those over the age of 65 will see a 10 per cent increase in their tax credit worth €88 million in a full year.