Shocking injustice of austerity taxes revealed
'Coping class' paid three times more tax than in previous year as take for richest actually drops
THE true scale of the tax burden on low- and middle-income earners as a result of the austerity drive is revealed in staggering new figures published today.
Estimates released by the Department of Finance showed that those who earn the least have been worst hit by tax hikes while the country's top earners contributed marginally less.
The figures provide a detailed snapshot of how the increased tax burden caused by the economic crisis has weighed more on the less-well-off than the richest.
They showed that the "coping classes" earning anything from €17,543 to €50,000 are bearing the brunt of austerity.
The biggest burden has fallen on those earning €17,542 to €20,000, who have collectively paid three times more tax in 2011 than they did in 2010 -- or a shocking 215 per cent increase.
Those earning €20,001 to €30,000 are paying 36 per cent more tax than they did in 2010 and those earning between €40,001 and €50,000 are paying 23 per cent more.
The huge tax burden was attributed to the introduction of the Universal Social Charge and on a reduction in tax credits in the Government's bid to raise more than €1bn in extra income tax in 2011.
However, leadings tax consultants said yesterday the figures showed how the tax hikes have had a "disproportionate effect" on the lower paid while leaving the country's highest earners largely unscathed.
For example, the 118 people in the country who earn more than €2m paid 0.3 per cent less in tax in 2011 than they did in 2010; the 1,148 who earned between €400,001 and €450,000 paid just 1.1 per cent more in tax.
The tax drop for Ireland's top earners is no doubt linked to the fact that they earned less last year: their taxable income fell by €9.2m in 2011.
However, the figures clearly showed that the hard-pressed lower and middle income workers also earned significantly less last year but contributed proportionally more in taxes.
Those earning €40,001 to €50,000 a year were typical: more than 207,900 of them paid €866m in tax in 2010; last year, there were 3,000 fewer people in that salary range yet their collective tax contribution soared to €1.058bn.
High earners on €100,000 to €125,000 paid €61m more in taxes although their ranks were depleted by 629 in 2011.
The Finance Minister admitted in the Dail last month that under half of Irish millionaires paid less than 30 per cent income tax in 2009.
He claimed that he has tightened restrictions on high earners who are able to avail of tax reliefs, while lower-income earners are taxed at the standard rate of 20 per cent and 41 per cent.
The figures, compiled by the Revenue Commissioners, are estimates of tax paid in the past two years. Finance Minister Michael Noonan released the figures in response to a parliamentary question asked by Labour TD Robert Dowds.
Despite the grip of recession, the population of Irish millionaires has increased: 519 earned between €1m to €2m -- 10 more than in 2010. They paid €180m in taxes on income of €677m. That works out at about 26 per cent of their collective earnings, which is roughly the same percentage they paid in 2010.
The numbers earning €500,000 to €750,000 rose by 30 last year; while those on €300,000 to €350,000 rose by 28.
Fiona O'Shea, tax consultant, said the figures showed that recent tax hikes have had a disproportionate effect on the lower-income earners. "The Irish tax system remains generally a progressive system -- the more you earn the more you pay," she said.
"However, the recent tax hikes through reduction in tax credits and narrowing of the standard-rate band have had a disproportionate effect on the lower income earners."
She said people in the income category €17,543 to €20,000 have seen their effective rate of tax treble while it increased by 50 per cent for those in the €20,000 to €30,000 category.
"The increase in effective tax rate is less as you go up through the income groups, so that the increase for the €50,000 to €60,000 group is just 1 per cent. . . And at the very top level of incomes, where the high earners' restriction applies, there is little or no effect from the reduction in tax credits and rate band -- the high earners restriction broadly maintains high earners' effective tax rate at 30 per cent."
Andrea McDonnell, a tax consultant at taxback.com said the most striking aspect is the increase in tax paid by lower income earners between 2010 and 2011.
"The total number of taxpayers is estimated to have decreased by 31,501 between 2010 and 2011. The estimated increases in tax generated by the Revenue in 2011 by comparison to 2010 are shocking but not surprising. The introduction of the Universal Social Charge and the reduced tax credits are the main culprits as we're seeing huge increases in tax from those earning such low levels of income."
Mr Dowds said they confirmed his suspicion that the tax take is "too much skewed toward the lower paid".
"If you look at the group earning between €17,543 and €20,000, the tax take tripled for that group between 2010 and 2011. But for those earning between €100,000 and €125,000, the tax take only marginally increased," he said.
In his response, Mr Noonan pointed out that the figures are estimates based on tax "units" rather than individuals, counting some married couples as a unit. They were provisional figures.
The Department of Finance said the top one per cent of earners pay 20 per cent of total income tax take, however they also earn 10 per cent of all income. Those on €50,000 or less -- who account for 77 per cent of taxpayers -- account for 19 per cent of the total income tax take.