OBSERVER: "In 2002 I will not be borrowing," said Minister for Finance Mr McCreevy on Budget afternoon. There are two ways that the tax system can help a finance minister accomplish such a goal.

The first: increase the "take" by increasing rates, reducing allowances or broadening the base of circumstances that can give rise to the tax charge.

Alternatively, the payment date of any tax that is due can be brought forward.

Mr McCreevy has been widely recognised as a minister who brought significant change to the way tax is charged in this State, having amended the rates for all taxes except, perhaps, VAT.

He restructured the way in which the tax on dividends is accounted for, and revised the manner by which assurance companies calculate their tax.

He has also changed the basis on which income tax is charged, from a year beginning on April 6th to a year commencing on January 1st.

This latter change may appear cosmetic but it will have a real impact during 2002.

Put simply, 2002 is the year in which the self-employed will make three rather than two major income tax payments - one for the tax year 2000/01, another for the transitional short tax "year" during 2001, and a third for 2002.

Even the PAYE taxpayer, who traditionally pays his or her income tax on the "drip" is helping the minister with his cash-flow problems.

It seems that we'll all be lending back to Ireland Inc the benefit of the tax reductions in last December's budget for at least three months.

Apparently there wasn't time to issue the proper tax-free allowances, or tax credits as they're now known, between Budget Day and the start of the new tax year, so we'll all have to make do with what we got last year.

This might not seem like a big deal, until you consider that in 2000, the last year for which hard figures are generally available, more than €7 billion (£5.5 billion) was paid in PAYE. Any amount of this colossal tax take that is accelerated in any way makes a difference.

At least with PAYE, the name "Pay As You Earn" tells it as it is; the money is generally earned before tax is paid on it. This is not the case with almost every other major tax category.

The so-called "invoice basis" upon which much VAT is collected from business creates a VAT liability before any money is received at all.

The self-employed are used to estimating and paying tax on an amount of income not yet received when they pay their preliminary tax each year.

This approach has obvious attractions for the Exchequer - it gets paid fast and first.

The concept has now been extended to corporation tax, whereby, over a five-year period commencing shortly, the payment dates for the bulk of corporation tax are being brought forward by seven months.

Again, we're talking a lot of money here. Some €4 billion was paid by companies during 2000. Work out the value of interest on €4 billion for seven months and you'll get some idea of the benefit of this change to the Exchequer - and the hit felt by business.

So what does 2002 hold in store for businesses in tax terms? Well, as usual there's the bi-monthly VAT returns and PAYE returns.

The P35s will have to be done early this year - before February 15th - because of the change to the income tax year.

No sooner will that have passed, but there'll be a fresh issue of Tax Credit Certificates to all employees - and hence a few euros more in the pay packets. Many companies will have three corporation tax payments to make during 2002, rather than just two.

Oh, and don't forget, the VAT rate goes up on March 1st, so there could also be a funding implication there.

Also don't forget that March 1st brings a reduction in the employers' PRSI contribution rate from 12 per cent to 10.75 per cent, which on the face of it might seem good news.

The Minister's reduction in the employers' contribution rate was probably intended to compensate for increased costs imposed in the 2001 budget, by his removal of the ceiling in the salary level in relation to which the contribution is calculated.

Whether or not it achieves that effect depends on the "salary mix" of the employer.

If employees are predominantly earning wages and salaries less than the amount of the ceiling removed in 2001 - which was €46,472 - this year's change is actually a significant cost saving for them.

At the other end of the scale, if the salary mix of the employer is heavily weighted towards high-paid employees, the employer may have suffered an increase in his PRSI charge in 2001 that could potentially be in excess of 100 per cent.

This year's 10 per cent reduction in rate (from 12 per cent to 10.75 per cent) will not fully compensate such an employer, or in some cases even go near to doing so.

The middle ground of employers, with a mix of lower and higher salaries, may well find that the result of the changes over the two budgets leaves their cost position relatively unaffected. The break-even point for an employer is a salary of €51,855.

Paradoxically, the cost of the current reduction in the PRSI rate is estimated by the Minister to be more than the revenue he expected to generate from the removal of the ceiling on employers' contributions in 2001.

With raids on the PRSI fund and the Central Bank and by accelerating and extracting more tax from the business community, it is not surprising that Minister McCreevy does not have to borrow funds in 2002.

John Bradley is president of the Institute of Taxation in Ireland and a taxation director with KPMG.