Monday 19 February 2018

The great tax grab leaves you €1,400 worse off

Assistant Secretary Michael McGrath and Principal Officer Ronnie Downes during yesterday's media briefing on the 2011 Exchequer Statement at The Department of Finance in Dublin. Photo: Collins
Assistant Secretary Michael McGrath and Principal Officer Ronnie Downes during yesterday's media briefing on the 2011 Exchequer Statement at The Department of Finance in Dublin. Photo: Collins

Brendan Keenan and Fionnan Sheahan

WORKERS were hit with a massive tax grab of €1,400 a head last year as the Government sought to shore up the public finances.

Income tax returns went up by a whopping 22pc, or €2.6bn, as the universal social charge took more money out of taxpayers' pockets.



Despite government claims that there has been no hike in income tax rates, changes to tax bands and credits and the introduction of the social charge have all taken their toll on pay packets.



But the total tax take was still 2.5pc below target as the recovery of the public finances continued to stagnate, according to the Exchequer Returns for 2011.



The economy is still stalling because of rising unemployment, less consumer spending, more austerity measures, the eurozone crisis, and the international downturn.



The figures last night showed that the position at the end of the year was about €600m off target.



However, as this deficit had been expected and planned for by the Government in the run-up to last month's Budget, the shortfall will not immediately impact on policy.



It even led to some degree of optimism about the management of the public finances going into 2012.



Austin Hughes, chief economist at KBC Bank, said that "at a time when there have been major overruns in a range of other euro area countries" the final figure could be taken as a positive.



Finance Minister Michael Noonan welcomed the increase in tax revenues. He also said the receipts highlighted the "robustness and credibility" of the Government's 2012 revenue forecasts.



The Government actually got a boost from an unexpected €100m at the end of the year. The late windfall came as wealthy people paid off their tax bill on sales of shares and property transactions.



They rushed to do this ahead of an expected hike in capital gains tax in December's Budget.



Even a month ago, the Government did not anticipate these extra receipts, which turned out to be a pleasant surprise.



All told, tax revenues went up by €2.25bn this year.



The increased income tax take means the 1.8 million people in the labour force each paid an average of €1,436 more in tax in 2011.



Some paid more than others as the universal social charge is linked to income.



For example, a regular married couple with a single income of €50,000 would have paid about €1,300 extra in income tax.



The boost from income tax including the social charge helped total tax revenues to grow in 2011 for the first time in three years. The increase to a total of €34bn was a 7.2pc rise on the previous year.



But the increase in income tax had a knock-on effect on consumer spending, with a shortfall of almost €500m in predicted VAT returns.



The VAT take during 2011 was €9.7bn, representing a drop of 3.6pc on the previous year's VAT take, which was €10.1bn.



The total tax figure was officially €875m lower than the Department of Finance forecast a year ago.



But some €261m worth of corporation tax collected in 2011 was lodged too late to be counted in the official figures for the year.



Because of the banks being closed for so many days over the Christmas period, the money only came into the Exchequer yesterday, so will have to be counted officially in January's figures.



Once this missing €261m is added into the equation, there was a shortfall of €612m in tax for the year as a whole.

Irish Independent

Promoted Links

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Also in Business