ANNEX A

Details Of Tax Changes In Budget 2002 And Their Effect On Different Categories Of Taxpayers


(i) Details Of Main Income Tax Changes

(ii) Examples Showing The Effects Of Budget Changes On Different Categories Of Married And Single Taxpayers
Examples 1 to 15 attached show for various categories of taxpayers the income tax, levy and PRSI liabilities payable under the existing and proposed structure. Changes to Child Benefit from April 2002 and the Family Income Supplement from January 2002 are also included in the calculations. These figures are rounded to the nearest euro. The gain and gross income are also shown in Irish pound equivalents and these figures are rounded to the nearest pound. The examples are based on specimen incomes with the basic tax credits and exemption limits only. The Home Carer credit is included as appropriate. The examples do not take account of discretionary reliefs. Examples showing the net gains to married two earner couples are calculated this year using the assumption that the higher income earner earns 65% of the couple’s total income and that the lower earning spouse earns 35% of the couple’s income. This is based on the Revenue Commissioners’ estimate of the average income split between two earner couples

(iii) Average Tax Rates
A table showing average tax rates for the years 1997 - 2002 for various household types is included.

(iv) Distribution of Income Earners
A table showing the distribution of income earners both pre-Budget and post-Budget.

(v) Illustrative Cases
A number of illustrative cases are included to show the impact of the tax/PRSI and social welfare changes in the Budget on a number different household types.

Change To Calendar Tax Year
From January 2002 the tax year will be aligned with the calendar year, therefore necessitating a transitional nine-month tax year in 2001, i.e. from April 2001 to December 2001. All comparisons between 2002 and the previous tax year 2001 are based on the assumption that 2001 tax credits, bands, FIS limits, Child Benefit rates applied for the twelve months of 2001.


(V) ILLUSTRATIVE CASES

These cases deal only with the basic personal tax credits and the employee tax credit. Discretionary tax reliefs such as rent allowance or charges such as benefit in kind are not taken into account. For comparison purposes the tax credits for the short tax year 2001 are shown in 12-month terms.

ANNEMARIE
Annemarie is single and employed as a cleaner and is earning €12,000 per annum. She will gain €275 from the Budget.


2001 2002

Gross Income

Standard Rate Band

Income Tax liability (€12,000@ 20%)

Less Tax Credits

Total Income Tax Due

PRSI

Levies

Total Liability

Net Cash Income

Deductions as a % of Gross Income

12,000 (£9,451)

25,395

2,400

1,905

495

0

0

495

11,505 (£9,061)

4.1%

12,000 (£9,451)

28,000

2,400

2,180

220

0

0

220

11,780 (£9,278)

1.8%



JOHN AND STEPHANIE

John and Stephanie are a retired couple. John is aged 72 and Stephanie is aged 69. John has an occupational pension of €25,000. After the Budget they will be outside the tax net. They will gain €1,366 from the Budget as a result of the tax and social welfare changes.

2001

2002

Gross Income

Exemption Limits

Income Tax (€3,414 @ 40%^)

Net Cash Income

Deductions as a % of Gross Income

25,000 (£19,689)

21,586

1,366

23,634 (£18,613)

5.5%

25,000 (£19,689)

26,000

0

25,000 (£19,689)

0%

^ Marginal relief rate of 40% payable on income in excess of the exemption limits

JOE AND NIAMH

Joe and Niamh are married. Joe is employed as an insurance salesman earning €40,000 while Niamh works in the home. They have three children and will gain €350 from the Budget.

2001

2002

Gross Income

Standard Rate Band

Income Tax liability

Less Tax Credits

Total Income Tax Due

PRSI

Levies

Total Liability

Net Cash Income

Deductions as a % of Gross Income

40,000 (£31,503)

36,823

8,699

4,064

4,635

1,196

800

6,631

33,369 (£26,280)

16.6%

40,000 (£31,503)

37,000

8,660

4,470

4,190

1,291

800

6,281

33,719 (£26,556)

15.7%



STEPHEN AND SARAH

Stephen and Sarah are a married couple with two children. Stephen is a civil servant earning €30,000 and Sarah is employed as a solicitor and earning €40,000. They will gain €1,601 from the Budget.

2001

2002

Gross Income

Standard Rate Band

Income Tax liability

Less Tax Credits

Total Income Tax Due

PRSI

Levies

Total Liability

Net Cash Income

Deductions as a % of Gross Income

70,000 (£55,129)

50,790^

18,226

3,810

14,416

1,454

1,400

17,270

52,730 (£41,528)

24.7%

70,000 (£55,129)

56,000^^

17,080

4,360

12,720

1,549

1,400

15,669

54,331 (£42,789)

22.4%

^ With maximum transferability between spouses of €36,823
^^ With maximum transferability between spouses of €37,000

LIAM AND BLÁITHÍN

Liam and Bláithín are a married couple with three children. Liam is a doctor employed by a hospital and earning €65,000 and Bláithín is runs her own interior design business and earns €35,000. They will gain €1,450 from the Budget.

2001

2002

Gross Income

Standard Rate Band

Income Tax liability

Less Tax Credits

Total Income Tax Due

PRSI

Levies

Total Liability

Net Cash Income

Deductions as a % of Gross Income

100,000 (£78,756)

50,790^

30,826

3,302

27,524

2,348

2,000

31,872

68,128 (£53,655)

31.9%

100,000 (£78,756)

56,000^^

29,680

3,700

25,980

2,442

2,000

30,422

69,578 (£54,797)

30.4%

^ With maximum transferability between spouses of €36,823
^^ With maximum transferability between spouses of €37,000

CAROLINE

Caroline is a widow aged 68, with a pension from her late husband’s employment of €14,765. She is also in receipt of a widow’s contributory pension of €6,735 which will increase to €7,530 in the Budget. She will gain €942 as a result of the tax and social welfare changes in the Budget.

2001

2002

Gross Income

Standard Rate Band

Income Tax liability

Less Tax Credits

Total Income Tax Due

PRSI

Levies

Total Liability

Net Cash Income

Deductions as a % of Gross Income

21,500 (£16,933)

25,395

4,300

2,363

1,937

0

430

2,367

19,133 (£15,068)

11%

22,295^ (£17,559)

28,000

4,459

2,685

1,774

0

446

2,220

20,075 (£15,810)

10%

^The increase in Gross Income is as a result of the increase in social welfare payments.

SHARON

Sharon is single and has a four-year-old son. Sharon works as a hairdresser and earns €24,000. She will gain €398 from the Budget.

2001

2002

Gross Income

Standard Rate Band

Income Tax liability

Less Tax Credits

Total Income Tax Due

PRSI

Levies

Total Liability

Net Cash Income

Deductions as a % of Gross Income

24,000 (£18,902)

29,395

4,800

3,302

1,498

696

480

2,674

21,326 (£16,796)

11.1%

24,000 (£18,902)

32,000

4,800

3,700

1,100

696

480

2,276

21,724 (£17,109)

9.5%