Budget 2000 has substantially improved the position of all taxpayers, with the biggest winners being working couples.
In an attempt to get more women back to work, the Budget proposes to discriminate in favour of dual-earning households, while single-earning families gain less.
For the next tax year, the standard rate tax band for married couples with two spouses working rises to £34,000. Where only one spouse is working, the band remains at £28,000. However, in a controversial measure, the Minister for Finance, Mr McCreevy, has outlined a three-year plan under which a move to "individualised" allowances would leave double income families much better off than those where only one spouse is working.
Mr McCreevy targeted middle-income workers and thousands will no longer pay tax at the top rate, with substantial increases in the standard rate tax band and a £500 increase in personal allowances.
Mr McCreevy also cut two percentage points off the top and standard tax rates bringing them to 44 per cent and 24 per cent respectively.
However, interest will centre on the differing treatment of married couples. The changes mean a couple with two children and two earners on £35,000 will be £2,144 better off in the 2000/01 tax year. A similar couple, where only one spouse works, will be £803 a year better off. At the same time a single person on £35,000 will be £1,331 better off.
The Institute of Taxation pointed out that the biggest winners would be couples who have no children and where both are working. "Those gaining least, however, will be couples where one partner has decided to devote their energies to rearing a family."
The Budget changes mean a single taxpayer will be able to earn up to £17,000 before moving onto the higher rate of tax. This is a £3,000 increase and has been almost universally welcomed.
A married couple with both working will be able to earn twice this amount - £34,000 - before moving on to the higher rate, up from £28,000.
However, in a very controversial move, the Budget leaves couples with only one earner in their former position. These couples can still only earn £28,000 before paying the higher rate of tax.
Mr McCreevy outlined how this system would progress over the next three years. In that time - based for illustration on this year's allowances - the single person will be able to earn £28,000 at the standard rate. A couple with both working will be able to earn up to £56,000, depending on individual salaries.
This will mean a huge difference in take-home pay will open up between married couples where one spouse is working and two-income couples.
Personal allowances were increased by £500 for single people and by £1,000 for married couples. However, there was no increase in the £1,000 PAYE allowance.
All widowed, incapacitated child, blind and dependent relative allowances were doubled and standard rated, to bring them into line with the tax credit system. The Budget was welcomed by IBEC as significantly improving the net pay position of all taxpayers. "It underpins the pay/tax strategy of recent years and challenges the negotiators of a new national agreement to ensure that pay increases continue to reflect competitive realities."
The ICTU also welcomed the tax reforms in the Budget but said more needed to be done for the low paid.
Online
The Irish Times on the Web at www.ireland.com is hosting an online Question and Answers session on the Budget from 11 a.m. Readers are invited to put their Budget questions to our panel of analysts comprising tax experts from PricewaterhouseCoopers and Irish Times journalists.