Friday 24 February 2017

High earners only forced to pay at least 20pc tax on income

tax

Charlie Weston

Charlie Weston

HIGH earners have been forced to cough up at least a fifth of their income in tax after new rules restricted the amount of money they can shelter from the Revenue Commissioners.

And 10 people who had not paid any tax previously, even though they earned €500,000 or more, have been brought into the tax net for the first time.

The top 500 earners in the country have been forced to pay at least 20pc of their income in tax, a report from the Revenue Commissioners and the Department of Finance shows.

Before the rules were changed, high earners were able to shelter their entire income from the tax authorities.

Wealthy individuals were able to ring-fence their income from the Revenue by investing in tax-approved schemes.

Tax expert Aidan McLoughlin, of the Independent Trustee Company, explained that someone with an annual income of €1m had been able to avoid tax by investing in an approved scheme, such as a hotel investment, student accommodation or an urban renewal project.

Typically, the high-net-worth individual would invest €1m in a hotel scheme approved for tax relief. He or she would put up just €100,000 and borrow €900,000 to come up with the €1m. This would give them a tax deduction of €1m that could be set off against other income.

This means that if they had income of €1m, they could end up paying no tax, instead of having to shell out €410,000.

But from 2007, the rules were changed to ensure that anyone with income of more than €500,000 would have to pay at least 20pc of their income in tax.

A new report from Revenue shows that 452 wealthy people had to cough up €39m in tax in 2009. However, the falloff in incomes means that the tax take from the wealthy was down from €40m in 2008.

Of the high earners, some 183 with an income of €500,000 or more paid an effective tax rate of 20pc in 2009.

Additional tax of €32.2m was gathered from these people, a rise of 150pc in from the previous years.

However, 269 people with incomes of up to €500,000 ended up paying an average effective tax rate of 12pc. Additional tax of €6.6m was collected from these people.

Since last year, anyone earning more than €400,000 must pay at least 30pc in tax.

Those who are earning between €125,000 and €400,000 are likely to be forced to pay between 20pc and 30pc.

Tax experts said the that figures from the Revenue last year showed that 3,000 people would earn more than €500,000.

Another 608 were expected to earn between €1m and €2m, with 188 people earning more than €2m.

Irish Independent

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