Employers and staff could see their tax liability rise substantially as a result of this year's Finance Bill, unveiled yesterday by the Minister for Finance, Mr McCreevy.

The Bill formalises a number of taxation measures contained within December's budget, but also moves to introduce a number of previously-unflagged changes as the Minister continues to "simplify" the tax system.

The main clarification measure is an overhaul of the calculation of benefits in kind, designed to coincide with the imposition of PRSI on "perks" such as company cars and gym subscriptions.

The Bill formalises a system whereby such benefits in kind will attract both employer and employee PRSI, thus raising the tax bill of both parties. Given that employee PRSI remains subject to a ceiling of €40,420 however, employers are likely to feel most pain when the system begins next year.

The Minister said yesterday that the move would raise about €40 million for the Exchequer in any given year. On budget day, he had estimated that up to €83 million could flow into the Exchequer each year as a result of the change.

The difference may be partly explained by the fact that the Minister has excluded share options from the benefits in kind to attract PRSI because such a system would be "too complicated".

Stock options did not escape Mr McCreevy's gaze, however, as he introduced a measure of relief for employees who lose the benefit of exercising their options because the ensuing tax liability exceeds the market value of the shares.

Under new rules, this tax bill will be no higher than the value of the shares, with employees allowed to defer the remaining liability until a later date.

As a quid pro quo, the Finance Bill requires people exercising share options to pay their tax within 21 days, a move likely to create a heavy administrative burden for accountants. Previously, this charge could be deferred for up to seven years.

A number of pensions provisions have also been subjected to radical change, principally in reaction to a perceived misuse of the existing system.

The Minister has provided that personal benefits such as loans or holiday homes can no longer form part of an individual's Approved Retirement Fund (ARF) investments without attracting a tax liability.

He has also reduced the limits on the maximum tax-deductible amount an individual can contribute to a Personal Retirement Savings Account (PRSA).

PRSAs, due to be introduced next month, had previously been due to benefit from a higher limit than other pension schemes.

Public servants have also been hit in the pensions changes, as the Bill reduces an employee's relief period for Additional Voluntary Contributions (AVCs) from 10 years to one year. It is understood that some public servants had abused the measure by borrowing in order to take advantage of the tax relief it allowed.

High earners have not avoided attention either, as the Minister moved to close 12 lucrative tax loopholes.

Key among these, from the individual's point of view, was the cessation of mortgage interest relief for "investors" who borrow money in order to purchase a spouse's residential property.

Mr McCreevy described the mechanism as "quite smart and ingenious" as he outlined his reasons for shutting it down.