Ireland’s Finance Minister Brian Lenihan has introduced new measures that will hit the Irish rich where they live, literally. Major figures such as Bono and others members of U2, as well as many leading businessmen, are essentially tax exiles from Ireland despite being citizens.

Now however, if you hold an Irish passport and have extensive holdings in Ireland, Lenihan said he will introduce a $300,000-per-year  levy on “all Irish nationals and persons domiciled here who earn more than $1.5 million in income worldwide, and who have capital located here worth more than $7.4 million.”

Lenihan was speaking as he introduced the toughest budget in living memory, seeking $5.9 billion in cuts, mainly from the public-sector workforce to try and cut down Ireland’s ballooning deficits.

The levy, which some are already facetiously calling the “Bono Tax,” a nod to the U2 singer’s fabulous wealth, will ensure that all Irish nationals who live abroad will have to make a major contribution to the nation's economic recovery.

Lenihan said Ireland’s rules on non-residency for tax purposes were broadly in line with most countries, but the Irish Government must ensure that every wealthy Irish domiciliary who pays little or no income tax through loopholes should make a contribution to the nation during a time of fiscal difficulty.

Questions about the enforceability of the new levy made some observers question its inclusion. The Irish government does not keep a list of every wealthy Irish domiciliary that has moved abroad. Some have claimed the new levy is a sop to Irish workers who have been scandalized by the tax breaks enjoyed by the Irish super rich.

In a budget that introduced $1.5 billion in cuts to the public sector, some observers believe the finance minister introduced the “Bono Tax” to appease trade unions and public-sector workers.

In the past Irish union leaders have reminded the public that of the top 400 highest Irish earners tax data shows nearly 50 paid less than 5% tax on their income due to tax breaks and loopholes for the Irish super-rich.

Ireland’s tax increases and public spending cuts are being watched with interest by economists who believe they could become the norm around the world. Lenihan told the Irish Parliament that this year’s tax hikes would be progressive, with the highest rises borne by the best-off. He said the budget would raise $5.1 billion and was crucial to restoring Ireland's financial credibility.

“Those at the top will lead by example,” Lenihan told the press on Wednesday morning. To bolster his claim, he announced that the Irish government will cut Prime Minister Brian Cowen’s salary by 20% or by a total of 30% including adjustments in the public-sector pension levy. Lenihan also cut ministerial pay by 15%.

Lenihan’s budget has been described by Irish economists as the most painful in a generation making $5.9 billion in spending cuts to cap the country’s soaring debt.