Saturday 23 September 2017

Accountants warn against increasing higher rate of income tax

State runs risk of over-reliance on too few taxpayers -- committee

Charlie Weston Personal Finance Editor

INCREASING income tax rates in the upcoming Budget would be counterproductive, according to four bodies that represent the accountancy sector.

Already some people were paying up to 55pc of their income in tax, the accountants said.

The combined impact of increases in the last three Budgets in levies and contributions on personal income had meant that marginal tax rates for the self-employed were up to 55pc, and 50pc for employees who earned more than €75,000, the accountants said.

There can be no economic or social justification for increasing marginal (or higher) tax rates, the Consultative Committee of Accountancy Bodies said.

Director of taxation with Chartered Accountants Ireland Brian Keegan said: "Two-thirds of all income tax is paid by one-tenth of taxpayers.

"This is dangerous, because it makes us over-reliant on very few people for exchequer funding. We run the risk of repeating the mistake of the property boom, by relying too heavily on too few people within the economy for our taxes."

The accountancy profession said tax credits should be reduced, and pointed out that anyone earning less than €700 a week paid almost no tax, while those earning up to €1,400 a week paid tax at 20pc.

"These are huge amounts compared to what social welfare recipients receive weekly. Yet taxpayers within these categories -- almost 90pc of all earners -- contribute very little.

"We estimate that if all income taxpayers paid an additional €25 per week through a reduction in tax credits, this would yield €1bn for the Exchequer," the submission stated.

The accountancy bodies suggested that stamp duty on principal private residences be replaced by a property tax, with ability to pay a more important consideration than valuation methods.

Investment

It is essential to get credit flowing again, and the tax system has a role to play in this. It should be possible for every taxpayer to claim tax relief for investment in business, the submission said.

The submission puts forward two alternatives to create a tax incentive for individuals lending money to business.

These involve the creation of special lending instruments, with some relief for losses in the event of business failure, and the use of business investment companies, where private investment is partially matched by government investment.

Referring to the 12.5pc corporation tax rate, the accountants said any adjustment to this rate might yield short-term gains, but at the expense of our reputation as an excellent environment for multinational companies seeking a European base.

Irish Independent

Also in Business