Ireland poised to reduce tax rates

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The Independent Online
BUOYANT tax revenues will enable Bertie Ahern, the Irish Finance Minister, to reduce public sector borrowing and lower income tax for the poorly paid today in what is expected to be the first give-away budget in several years.

Signals from the national pay talks between trade unions and employers suggest that Mr Ahern will agree to unions' demands to abolish, for 75 per cent of the workforce, the 1 per cent income levy introduced in last year's budget.

Other strongly tipped income tax concessions include higher personal allowances and a rise in the threshold at which workers enter the higher-rate band. The 27 per cent standard tax rate comes in at Ir pounds 7,475 (pounds 7,146) and the 48 per cent higher rate at Ir pounds 10,900 a year.

One effect will be to reduce the disincentive for those on welfare benefits to take up low-paid employment.

But with falling interest rates reducing house-buyers' mortgage repayments, relief on interest payments is expected to fall, possibly over three years, by limiting it to the 27 per cent standard tax rate.

A drop in the threshold on the value of houses where owners qualify for residential property tax is also predicted. The threshold is paid on homes worth Ir pounds 91,000 and over.

Measures to encourage job creation may include more cash for local community enterprise schemes as opposed to state-directed programmes. Unemployment is almost 300,000 - nearly 20 per cent of the workforce.

Incentives for small and medium-sized businesses may include a reduction in capital gains tax for entrepreneurs and family firms.

Other budget leaks have included the possibility of the sale of part or all of the state's remaining 15.3 per cent stake in Irish Life, worth Ir pounds 115m.

With projected growth of 4-5 per cent for 1994, Mr Ahern's strong position means he can afford to allow for some reflation while staying within European Union borrowing guidelines, with the PSBR remaining close to Ir pounds 700m.

Child benefit should rise Ir pounds 5 a month but, after no change last year, alcohol is likely to be subject to higher excise duties, with levies on petrol and tobacco.