Saturday 15 December 2018

Revealed: the methods used by wealthy to avoid large tax bills

Revenue (stock image)
Revenue (stock image)
Kevin Doyle

Kevin Doyle

Some of the country's wealthiest people were able to declare taxable income below the average industrial wage because of previous financial losses.

Revenue Commissioners revealed the main methods used by the wealthy to avoid substantial tax bills.

It follows on from a report by the Comptroller and Auditor General (C&AG) which showed one in four "High Wealth Individuals" (HWIs) have declared taxable income below the average industrial wage. To be classified as a HWI, they must have more than €50m in net assets.

The C&AG's study showed "relatively low amounts of tax" paid by these people due to "the use of credits and reliefs".

Correspondence from Revenue to the Public Accountants Committee (PAC) sheds more light on exactly how tax bills are being suppressed.

The body says 22 out of the 83 HWIs had "specific circumstances" which allowed them write-off tax. Primarily, the reductions related to "property-related business or investments negatively impacted or bankrupted by the economic crash".

Another 15 HWIs made "legitimate claim to significant level of relief" due to other financial losses.

Revenue say 25 people fell into the category of HWI due to family members and "did not in their own right have high income".

Finally another 21 were "non-residents/non-domiciled individuals who are subject to Irish income tax only on their Irish source income/income remitted to Ireland".

The PAC is expected to discuss the report today. Members previously expressed concern that individual with millions in assets are able to limit their tax bills.

Revenue notes there are a number of "paths" to becoming a HWI in this country.

The first is by being born into a wealthy family.

"Generally, the focus of HWIs who have inherited their wealth is wealth preservation and planning the passing of that wealth from one generation to the next, whether by gift or inheritance," Revenue say.

The second way is by self-creating/accumulating wealth over decades.

Finally a person can become a HWI "suddenly, through an inheritance or on the sale of business".

Irish Independent

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