THE government is set to cut the top rate of income tax by one percentage point to 41% in Wednesday's budget, according to informed sources.
The generous tax package will also benefit lower earners and there is speculation that the government will offset potential criticism about cutting the top rate by also taking a point off the current standard tax rate of 20%.
Tax credits will be increased and there will be a widening of tax bands to ensure a reduction in the number of people paying tax at the top rate.
Friday's publication of the estimates of receipts and expenditure for 2007 showed finance minister Brian Cowen can afford to give away billions on Wednesday and still maintain a budget surplus.
However, both the Taoiseach and Tanaiste insisted this weekend the budget will be "prudent".
But there will be generous increases in social welfare, with spending likely to top last year's 1.1bn package. The old age pension will increase to around 208 a week, while the government will be expected to match last year's 17 rise in social welfare rates. Cowen will also announce a major spending initiative in health, focused on care of the elderly, and increases in child benefit.
Some change in stamp duty is expected, with most close observers predicting an increase in the threshold at which stamp duty kicks in for firsttime buyers. There is also great interest to see if Cowen's repeats last year's surprise decision not to increase taxes on the 'old reliables' of drink, cigarettes, petrol.
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