Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

This public health measure will take effect from midnight tonight and will bring the price of cigarettes in the most popular price category to €10.50.

This measure will raise €61.4 million in a full year and the additional revenue will enable the funding of new initiatives in the health sector to support young families with children. This is the only tax increase in this budget.

Making work pay

Creating jobs and rewarding work is a key driver of growth and prosperity in the economy. More important, it is essential to ensure the benefits of a growing economy are felt inside the door of every family in the country. Just under 2 million people in Ireland have a job and by the end of the decade we hope we will have more people at work in Ireland than ever before. It is critical that work pays for every family. The Taoiseach has set out a key objective for the years ahead of ensuring that every family is better off and in employment. However, we must strike the right balance between rewarding work for the very lowest paid and keeping the tax base as broad as possible. This was a key issue discussed during the national economic dialogue.

The many barriers to taking up employment include taxation, wage levels for the low paid and childcare costs, which have a very negative impact on female participation in the labour force. These three issues are also barriers to growth and investment and are discouraging many of our young people who have emigrated from returning home. In budget 2016 we have put a particular emphasis on addressing these challenges. I will address the taxation issues and my colleague, the Minister for Public Expenditure and Reform, Deputy Howlin, will address the other two issues, namely, the issue of low-paid workers and affordable child care costs.

The changes I introduced in budget 2015 resulted in every worker in Ireland receiving increases in his or her pay this year. For many, this was the first increase in years. I also supported job creation across the economy. Focusing the majority of the available resources for tax reductions on low and middle-income families was the right thing to do last year. By reducing the marginal rate of tax for people earning less than €70,000, workers kept more money in their pocket. I will continue with this approach this year.

From 1 January, I am increasing the entry threshold to universal social charge from €12,012 to €13,000, removing approximately 42,500 workers from the scope of the charge entirely. It is estimated that more than 700,000 income earners will not be liable for universal social charge at all from next year. I am also reducing the three lowest rates of universal social charge. I am reducing the 1.5% rate to 1%. This applies on the first €12,012 of income. I am reducing the 3.5% rate to 3%. This applies on income in excess of €12,012 up to an increased threshold of €18,668. I am reducing the 7% rate to 5.5%. This applies on income in excess of €18,668 up to €70,044. This will reduce the marginal rate of tax to 49.5% for all earners under €70,044. This is the first time that the marginal rate has dropped below 50% for middle-income earners since the supplementary budget in April 2009. I am retaining the exemption from the top rate of USC for all medical card holders and those over-70 earning less than €60,000. This group, of course, will benefit from the reduction in the second USC rate to 3% from 3.5%.

As with the measures I introduced in budget 2015, I have crafted these measures to restrict the benefit to people’s incomes up to €70,000 per annum. People with higher incomes will not receive any benefit on their income above €70,000 but, of course, will benefit on the portion of their income below that level.

Supporting single-income families

I am also announcing an increase to the home carer's tax credit of €190 to bring it to €1,000 per year to assist single-income married couples with children and those who care for an elderly or incapacitated relative. The income threshold up to which the home carer can earn has also been increased by €2,120. This measure will help lower-income families by allowing the home carer to earn up to €7,200 and still benefit in full from the tax credit.

These changes mean that every worker and every pensioner who currently pays income tax or USC, or both, will benefit from today’s budget changes, taking account of the tax and expenditure measures.

There are many examples given in the documents accompanying the budget but to mention some now, a one income family with two children earning €35,000 will see their take home pay increase by €57 a month due to this budget, which is €684 per annum; a single person working full time on the minimum wage, earning €17,542, will see an increase of 4.2% or €708 a year;-----

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