There just ain’t no escaping it this week – all eyes are on Friday and what the fallout will mean for your pocket. The Sunday Times and The Sunday Business Post both offer comprehensive synopses (if that’s not an oxymoron) of the policies being promised by the main parties and how this will likely affect various strata of society.

Both papers break down the manifestos by main taxation areas:

  • Income Tax

Fine Gael is opposed to any more rate hikes and is also against the current proposals from the last government to reduce tax credits and rate bands, noting that the marginal rate of tax on earnings over €32,700 is already 52%.

Labour is pledging no increases for anyone earning less than €100,000 and like its probable coalition partner, is opposed to reducing tax credits and rate bands.

Fianna Fail (having admitted it had probably taken more than enough out of salaries already) are committed to a freeze on current rates and has pledged not to introduce a third rate of tax for high earners.

“In 2010, the top 5% of earners paid 48% of income tax. It is clear there is no huge additional pot of gold to be got from high-income earners,” said FF leader, Micheál Martin.

However, ordinary punters would still feel more pain in the unlikely return of a FF government. The reduction in tax credits and bands proposed by the party of more than 7% over the next three years on top of a 10% cut in 2011 would see a single person earning €55,000 a year paying an additional €714 in tax by 2014. Single-income families with the same earnings would be €945 worse off in three years.

  • Universal Social Charge (USC)

Fine Gael and Labour are both committed to changing (but not abolishing) the recently introduced and much-loathed USC, which is supposedly a temporary measure until government revenues improve.

Fine Gael has promised a review of the USC prior to Budget 2012, on the basis that it could be a disincentive to work in its present form. Labour believes the USC “was not properly thought through” and says it should be reformed to protect vulnerable families. It would recoup any shortfall by extending the 10% rate currently levied on self-employed individuals earning more than €100,000 to everyone earning that amount.

  • Homes and Mortgages

It looks like whoever takes the reins of power, a property tax is now inevitable – the only questions are about the extent of it and its implementation.

Fianna Fail would introduce a flat rate annual tax of around €100 on every house in 2012 as an interim measure before the introduction of a site valuation tax the following year – which would probably cost every homeowner €200 a year.

Mortgage interest tax relief would be reduced next year and scrapped after this.

Fine Gael is rejecting an annual property tax but would increase bin charges and impose higher taxes on people selling their homes. It would also increase the current €200 a year levy on second homes to €300 a year.

Labour accepts the need for a tax based on the value of a site but argues it is not feasible to introduce this in the short term because of the complexities of the market – particularly the number of homes in negative equity and the tens of thousands of homeowners struggling to pay mortgages.

The party has effectively kicked the issue to touch, promising to publish a Green Paper on how the charge could be structured in a “fair and efficient manner”.

It agrees with Fine Gael on the increase of tax for second homes to €300.

  • Pensions

Fianna Fail wants to reduce tax relief on pension contributions from 41% this year to 34% next year, 27% in 2013 and 20% in 2014. It has also promised the EU and IMF it would increase the age for social welfare pensions to 66 in 2014, 67 in 2021 and 68 in 2028.

Fine Gael would keep tax relief on pensions at 41% but there would be a temporary levy of 0.5% on the value of their funds imposed every year. Pension funds would not be allowed to exceed more than €1.5m at retirement – down from the current €2.3m.

Again, Labour and Fine Gael aren’t as far apart as the public rhetoric would suggest – at least not in certain aspects of policy. Labour would cap the tax relief on contributions, reduce tax-free lump sums at retirement and cap the size of pension funds.

Labour says the present distribution of reliefs is neither fair nor equitable and plans to reduce the total amount of reliefs available by €500m.

  • Capital Gains (CGT) and Capital Acquisition (CAT)

CGT and CAT have been increased to 25% recently and the exemptions available have been restricted considerably. Fianna Fail would broaden the base for capital taxation – bringing more people into the net – and tighten the exemptions still further.

Fine Gael would apply marginal income tax rates, rather than CAT, to inheritances from Approved Retirement Funds from next year.

Labour would introduce new “progressive structures” for capital taxation – the first €50,000 over the relevant thresholds would be taxed at 30% and the balance at 35%.

  • Miscellaneous Tax reliefs

Fianna Fail would maintain tax relief on medical expenses at the current 21% rate but it would phase out relief on private rented accommodation over the next eight years. It would also abolish tax reliefs on employer-provided childcare and union subscriptions.

Fine Gael would cut the threshold for the minimum 30% effective rate of tax from €400,000 to €250,000, with marginal relief from €125,000. At the lower end of the scale, FG would maintain the current medical expenses relief and rental relief would be 20%.

Labour would also maintain tax relief on medical expenses at the current rate and says it has no plans to changes rent relief rules.

  • Child Benefit

Fianna Fail says more than €1.9 billion has to be saved in the social welfare budget between 2012 and 2014 and is committed to reform the system of child income support to replace it with a payment for the first child only and then means-test it for subsequent children.

Fine Gael is proposing the maintenance of a universal payment but also the establishment of an expert group on child poverty with a view to reprioritising the payments in favour of those who really need it.

Labour would not make any changes to the current levels of benefit.

The Sunday Times goes further than The Sunday Business Post by making recommendations to its readers on the best course of action, given what is likely to be coming down the tracks.

  • Inheritance tax will increase regardless and assets should be gifted to children or other family members before this takes effect
  • Don’t wait for the market to fall any further if you’re thinking of buying your first home. First-time buyers are currently entitled to mortgage interest relief worth €31,500 over the next seven years – if Fine Gael takes power, this could be abolished altogether
  • Keep contributing to your pension in the normal way if you are a high earner. It may be your last chance to do so at the top rate of tax relief.

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