Income Levy and PRSI Levies

dcr22B

Just received this from KPMG by e-mail to work:

"The supplementary budget announced increases in the income levy and health levy rates. On the face of it, it would appear that the changes only take effect from 1 May 2009. However, the small print of the budget documentation issued by the government indicates that the increases are being backdated to 1 January 2009 on a prorated basis."

Have contacted my payroll software provider and they are working on an update from 01/05/2009.

I'm awaiting a response from KPMG as to whether the above statement will come to fruition but it would be an administrative nightmare as well as possibly THE most draconian measure ever witnessed by the Irish public.

Riskymove

I have a mate in Revenue who claims that backdating tax is unconstitutional ( I mean imagine raising CGT and then backdating it a few years...what fun)

But as htese are these sneaky levy things...who knows

ixoy

My understanding is that they'll judge your levy rate based on your wage from Jan 1. So say you're on 78k at the beginning of the year and suss out that the 2% levy threshold will drop to include you in the next budget.
On April 1st then you drop your wage to 76k, just below the new 4% levy. "Haha!" you think "I'm actually saving more on this wage!"
"But ahaha right back" says Revenue, "We've backdated these checks and you're paying 4% (or pro-rate version thereof)."

Least I think that's the scenario - asking people to hand up 1% of their wage from January - April will not happen without blood on the streets.

Euro_Kraut

This was the Bill that was passed through the Dail:http://debates.oireachtas.ie/DDebate.aspx?F=DAL20090407.xml&Node=H10&Page=8

Sorry for the long quote.....

(d) in section 531D by substituting the following for subsection (2)—

“(2)(a) As respects any payment of relevant emoluments made to or on behalf of an employee in the period beginning on 1 January 2009 and ending on 30 April 2009, income levy shall be deducted from such emoluments by the employer at any or all of the following rates—

(i) 1 per cent where the amount of the relevant emoluments does not exceed €1,925, in the case where the period in respect of which the payment is being made is a week, or a corresponding amount, where the period is greater or less than a week,

(ii) 2 per cent on the amount of the excess where the amount of relevant emoluments exceeds €1,925, but does not exceed €4,810, in the case where the period in respect of which the payment is being made is a week, or a corresponding amount, where the period is greater or less than a week,

(iii) 3 per cent on the amount of the excess where the amount of relevant emoluments exceeds €4,810, in the case where the period in respect of which the payment is being made is a week, or a corresponding amount, where the period is greater or less than a week,

and notwithstanding that the relevant emoluments are in whole or in part for some year of assessment other than that during which the payment is made.

(b) As respects any payment of relevant emoluments made to or on behalf of an employee on or after 1 May 2009, income levy shall be deducted from such emoluments by the employer at any or all of the following rates—

(i) 2 per cent where the amount of the relevant emoluments does not exceed €1,443, in the case where the period in respect of which the payment is being made is a week, or a corresponding amount, where the period is greater or less than a week,

(ii) 4 per cent on the amount of the excess where the amount of relevant emoluments exceeds €1,443, but does not exceed €3,365, in the case where the period in respect of which the payment is being made is a week, or a corresponding amount, where the period is greater or less than a week,

(iii) 6 per cent on the amount of the excess where the amount of relevant emoluments exceeds €3,365, in the case where the period in respect of which the payment is being made is a week, or a corresponding amount, where the period is greater or less than a week,

and notwithstanding that the relevant emoluments are in whole or in part for some year of assessment other than that during which the payment is made.”.

Prehaps someone with a better knowledge of law than me could clear this up?

narwog81

that would be a very sneaky one indeed, FF seriously need to take a hard look at the amount of money they are paying their PR consultant types.

this mini-budget seemed to pass without an obvious public rallying point for anger (i.e. the over - 70s medical card fiasco), however if this is true it will do the trick nicely

leeroybrown

I think that whomever wrote the text quoted by the OP is very much mistaken. The levy increase will only apply to income from May 1st. This is relatively clear in the quote by Euro_Kraut too.

dcr22B

leeroybrown wrote: »

I think that whomever wrote the text quoted by the OP is very much mistaken. The levy increase will only apply to income from May 1st. This is relatively clear in the quote by Euro_Kraut too.

Trust me, I took that as a direct quote and I'm trying to ascertain from KPMG as to its genuinity at this moment in time as I've spoken to other people and they're all singing off the 01/05/2009 hymnsheet.

leeroybrown

dcr22B wrote: »

Trust me, I took that as a direct quote and I'm trying to ascertain from KPMG as to its genuinity at this moment in time as I've spoken to other people and they're all singing off the 01/05/2009 hymnsheet.

Don't worry, I'm not calling you into question at all.

For me the canonical answer is here (Revenue). The Revenue notice is very clear about this.

dcr22B

leeroybrown wrote: »

Don't worry, I'm not calling you into question at all.

For me the canonical answer is here (Revenue). The Revenue notice is very clear about this.

Just got confirmation from KPMG that what leeroybrown is pointing to is pretty much the scenario.

Just wish it had been worded better.

dan_d

So what is being reported today is wrong?
http://news.eircom.net/breakingnews/15423988/?view=Standard
Because that would make me seriously angry.

Flaccus

http://www.irishtimes.com/newspaper/frontpage/2009/0416/1224244812773.html

From reading the above, it looks like paye workers won't be affected, only people who received bonus's, dividends, or redundnacy payments (over the statutory) from jan 09. And self employed who front loaded their tax at the beginning of the year.

"However, people on PAYE whose income is spread evenly throughout the year will not face any clawback."

Also, the important bit, they have calculated a blended rate for those affected :

"Under the old system, a person earning less than €100,100 paid the income levy at 1 per cent. Although the rate jumped to 2 per cent on income up to€75,036 and 4 per cent above that in the emergency Budget, it was assumed all income taken before Budget day would certainly come under the old regime. Now it appears they will pay extra tax – 1.67 per cent on the first €75,036 and 3 per cent on the balance."

So anyone who got a bonus from jan 09 will have to pay an additional 1.67% tax.

is_that_so

KPMG chap on Morning Ireland also explained it as a blended rate. He described it as an "unintended action" and expected that the Finance Bill will more than likely address it in some way.

Flaccus

Well at least they are not applying this blended rate accross the board to every paye worker. only those who earned above their normal salary between jan-april this year. And it looks like income leavy only. No backdating of the health leavy increase.

leeroybrown

Interesting. So the new rates for assessment of the self-employed pull others into the who've received voluntary redundancy payments further into the net. I'm not sure if that can really be allowed to stand by the government.