Tuesday 20 February 2018

Super-wealthy only pay 'tiny fraction' in tax

Richest 450 paid average of €1.25m last year

Michael Noonan
Michael Noonan


The richest 450 people in Ireland -- who are worth at least €22.5bn between them -- paid an average tax bill of about €1.25m last year.

The total amount of tax paid by this wealthy elite to Revenue's 'high wealth individuals' business team -- which was set up to collect tax from the super-rich -- came to €582m last year.

The €582m in tax largely includes tax collected from 450 individuals and the partners of nine professional firms.

As Revenue's high wealth individuals business team only collects taxes from individuals with net assets worth at least €50m and non-residents with substantial economic interests in Ireland, it means the average tax bill of €1.25m is likely to be only a tiny fraction of what the assets of these individuals are worth.

That average bill is also only a fraction of the €14m personal tax cheque which Ryanair boss Michael O'Leary famously presented at government buildings in October 2003.

Revenue takes assets such as property, shares, savings and government stock into account when gauging whether or not an individual should be monitored by its high wealth individuals business team.

The recession and collapse of the property market has, however, "decimated" the value of many of these assets, according to Brian Keegan, director of taxation at Chartered Accountants Ireland.

"Someone may have built up an expensive portfolio of properties but those properties could be worth very little today," says Mr Keegan. "Because of the volatility of the property market and stock market, it's hard to draw a straight line between someone's net worth and their capacity to earn enough to pay tax bills.

"High worth doesn't always mean high-income, and vice versa. However, people with high asset values may have greater tax liabilities and more complicated tax issues; hence there is a special unit with Revenue to deal with them."

Mr Keegan also points out that a lot of people who qualified as high-wealth individuals a few years ago don't qualify anymore.

Property tycoons in particular have seen the value of their properties plunge since the market started to collapse about five years ago. Builders Bernard McNamara, Liam Carroll and hotelier Jim Mansfield, for example, were worth hundreds of millions during the boom. And Sean Quinn, once Ireland's richest man, was declared bankrupt last January.

Revenue's high wealth individuals business team is part of the taxman's large cases division, which was set up in 2003 to deal with the tax affairs of large corporates, the financial services sector, motor distributors and the super-rich. Revenue's large cases division collected €20.8bn in taxes last year.

Earlier this year, Finance Minister Michael Noonan told the Dail that nearly half of Irish millionaires pay less than 30 per cent tax. In total, 291 of the 620 people earning over €1m pay under the 30 per cent tax level. About one in five workers pays tax at the higher rate of 41 per cent.

Revenue does not identify any of the super-rich who pay tax to the high wealth individuals business team -- or divulge how much they earn.

At the top, Ireland remains a wealthy country despite the bust. The Sunday Independent Rich List 2012 identified 300 people worth more than €62bn, almost as much as Ireland received in the IMF/EU bailout. However, Ireland's richest man -- Pallonji Mistry, a secretive Indian tycoon -- is unlikely to pay much, if any tax here. He only took out Irish citizenship in 2003 and despite his wife Patsi being born in Dublin is not known to have ever visited Ireland.

Other billionaires, while not residing in the State, end up making big contributions to the Exchequer -- but this may be via company tax, rather than through personal taxes.

Many of Ireland's mega rich do have to pay big tax bills -- but many more have shipped big losses from the bust which they can offset against gains. The wealthy can also afford to pay for the best tax advice on how to avail of various legal tax avoidance schemes.

Sunday Indo Business

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