Marginal income tax cut

The tax bands are being widened marginally in a revision that will give people savings of between €53 to €215 a year. The move is expected to cost about €12 million but falls far short of the radical cuts promised by the government before the March 8 election.

The Nationalist Party's electoral programme had pledged to reduce the maximum income tax rate from 35 per cent to 25 per cent and Prime Minister Lawrence Gonzi had subsequently indicated that the measure would be introduced this year.

The pre-budget document had made the same promise. "It is the government's firm belief that cuts in income taxation levels would not only increase disposable income but would, moreover, encourage work. In addition, such cuts would ease the burdens on families and businesses arising from the current spate of inflationary pressures."

The lowest tax band of those on a single computation has been widened by €350 bringing the non-taxable amount to €8,500. The 25 and 35 per cent bands have been widened by another €500 each. The lower tax band for those on a joint computation have been widened by €500, bringing the non-taxable amount up to €11,900. The 25 and 35 per cent bands have been widened by €700 amounting to tax cuts of between €75 and €215. Over a three-year period, this means a reduction of between €208 and €1,575.

While higher penalties are being planned for fraudulent or late filing of the tax return, the rate of interest on late filing of income tax and VAT are being scaled from 12 per cent to nine per cent each year and from one per cent to 0.75 per cent on a monthly basis.

Other fiscal measures promised in the pre-budget document were the removal of the €16.3 annual credit card levy and the €34.94 licence fee on television sets. Neither were mentioned in yesterday's budget.