Following the unveiling of the 2017 Irish Budget on 11 October no changes were made to the normal tax rates of 20 per cent and 40 per cent however the Universal Social Charge (USC) is set to be reduced for low and middle income earners. The Earned Income Credit will increase to EUR 950 and the self-employed PRSI contributor will now get access to more social welfare benefits.
USC Rate Reductions
USC is reduced for low and middle income earners by reducing the rates by 0.5 per cent as follows:
First 12,012 @ 0.5 per cent
Next EUR 6,760 @ 2.5 per cent
Next EUR 51,272 @ 5 per cent
The balance over EUR 70,045 remains subject to the USC at eight percent and the self-employed continue to be subject to the higher rate of USC of 11 per cent on income in excess of EUR 100,000. Medical care holders and individuals aged over 70 years and whose aggregate income does not exceed EUR 60,000 will pay a maximum USC rate of 2.5 percent.
The cost of the USC rate reduction will be EUR 335 million in 2017.
Income Tax Credits
The Home Carer Tax Credit is increased again in Budget 2017 with the announcement of a EUR 100 increase to bring the credit to EUR 1,100.
The Earned Income Credit for the self-employed increases from EUR 550 to EUR 950. This is still short of the comparable PAYE credit for employees of EUR 1,650.
The rate of DIRT is set to reduce to 39 per cent in 2017 and then by two percent each year until it reduces to 33 per cent in 2020.
Corporation Tax Rate
As expected, the Minister reaffirmed Ireland’s commitment to retaining the 12.5 per cent corporation tax rate stating that the 12.5 per cent rate was one of the reasons that Ireland is an attractive destination for foreign investment particularly in light of the UK’s impending departure from the EU. Some measures were introduced to tackle offshore tax evasion and non-compliance.