In his Budget Speech on 7 April, the Minister for Finance announced that "the Government has decided to double the rates of the Income Levy and to reduce the entry points for each rate. The new rates will be 2%, 4% and 6%. The new entry points will be €15,028, €75,036 and €174,980 per annum, with the weekly equivalents being €289, €1,443 and €3,365 respectively" and "All of these measures will take effect from 1st May 2009".
Financial Resolution No. 1: Income Levy, which is available here, provides a "composite blending" table which provides income levy rates that will apply for the 2009 year of assessment. The resulting table would seem to result in payments made prior to 1 May 2009 being subject to a higher income levy rate than that which applied when the payment was made.
This provision in the Financial Resolution is at odds with what the Minister stated in his Budget Speech. If this provision is allowed to stand it will result in retrospective taxation and, indeed, this is at odds with the Minister's statement that the measures "are fair, equitable and highly progressive".
A key aspect to any tax system is to ensure that taxpayers know their responsibilities, their obligations and their entitlements at the time the tax is due. If taxpayers are subject to retrospective taxation on income received prior to 1 May 2009, it could result in untold damage to Ireland's reputation at home and abroad, especially at a time when Ireland needs to enhance its reputation.
ICAI will be discussing this matter with Revenue officials this afternoon at TALC.