Wealthiest paying less tax now than at height of boom
Published 21/12/2012 | 05:00
THE country's highest earners are paying a smaller share of income tax now then they did at the height of the boom.
New figures from the Revenue Commissioners show that 20.5pc of all income tax is now paid by those earning €200,000 or more – a drop from 23.4pc in 2007.
And the number earning hefty pay packets has risen by more than 2,800 in the last year despite the worst recession in living memory.
The top 120 earn €2m or more a year, the Irish Independent has learned.
The extent of the drop in tax revenues from the wealthy comes just weeks after the Government refused to increase the Universal Social Charge (USC) on earnings of more than €100,000.
Finance Minister Michael Noonan said the decision not to impose the hike on senior civil servants, doctors, chief executives and wealthy business people was because it could give an advantage to Ireland's competitors in the hunt to attract foreign investors.
Tax experts last night said the reason why the take from the wealthiest had reduced was because those earning as little as €10,000 a year were now hit with the USC.
Anti-poverty campaigners said despite the rich earning more, they were not paying their fair share.
The figures show that in 2009, the very richest earned €8.3bn and had an average tax bill of €113,823 each.
In 2011, they earned €500m more, but average tax bills fell by more than €800 to €112,989.
An analysis of Revenue figures also shows:
? Last year, some 21,694 people earned €200,000 or more a year. Average earnings were €401,156.
* They paid €2.481bn in income tax, against income of €8.811bn. In all, they contributed 20.5pc of all income tax receipts.
* In 2007, some 24,234 people had average earnings of €437,977 each.
* They paid €2.87bn in tax, against income of €10.6bn. The payments represented 23.4pc of all income tax.
* The number of wealthy people earning more than €200,000 has increased from 19,138 in 2010 to 21,964 last year.
* This represents one in every 100 workers in the State. The top 120 earned at least €2m a year.
Experts said the introduction of the USC accounted for up to half of the total tax take, and was now paid by those on low incomes.
"It's an effect of broadening the tax base," one said.
"It's not that the higher income categories are paying less. The lower-income categories are paying more as a proportion than they used to, mainly due to USC.
"The abolition of various tax reliefs has made a difference. Perhaps just as importantly, USC is applied almost entirely without reference to income tax reliefs, and it probably accounts at this stage for about one-third to one-half of the total tax take."
The Department of Finance says that Ireland's tax system is the "most progressive" in the world, and that those with the most have been hit hardest in the pocket since the economy collapsed in 2008.
"The greatest losses over the period were for those with high incomes, and the smallest losses for those with the lowest incomes," it says in a Budget report called 'Distributional impact of recent Budgets and progressivity issues'.
Average tax rates for individuals earning €200,000 a year are 45pc, it says, which includes income tax, PRSI, health levies, pension contributions and USC.
But middle and lower incomes have also been hit with cuts in fuel-allowance payments, reductions in child benefit and rent supplement payments, new charges for school transport, changes to the drugs payment scheme and a hike in the VAT rate to 23pc, which is levied on basic items like toilet paper.
Social Justice Ireland said the gap between Ireland's rich and poor was at its greatest in 30 years, and was continuing to widen.
Central Statistics Office figures showed that the top 10pc of earners had €123,547 a year in income after tax was paid, compared with just €8,928 for the lowest 10pc, spokesman Fr Sean Healy said.
"This proves the point that the distribution is unfair," he said.
"The hit went further down the line instead of up. In effect, their income has gone up but their tax payment that they're making on average is down, which is very interesting.
"The argument has been those who earn more should pay more. They're paying less and less. It does prove that the Government has been making decisions that benefit the rich at the expense of the rest of us, and not just the poor."