Friday 22 November 2019

Workers paying €300 more in tax despite €5,000 pay cut since 2008

Charlie Weston Personal Finance Editor

WORKERS are paying vastly more tax since the start of the economic crisis in 2008 despite earning less.

Stark new figures show that even those on incomes of €50,000 who have suffered pay reductions have ended up shelling out more.

The universal social charge has been blamed for the higher burden on employees.

A typical worker on €50,000 in 2008 is now earning €5,000 less because of pay cuts. This means the worker's annual gross pay has fallen to €45,000 in the four-year period -- but their take-home pay has dropped to just €36,273.

This person is paying more in tax than he/she was paying four years ago, mainly because of the universal social charge, figures compiled for this newspaper show.

People on €100,000 are paying an extra €2,177 in income tax and other charges, despite their gross earnings falling due to pay cuts. Again, this is largely due to the universal social charge.

Back in 2008 there was no universal social charge, but workers had to pay a health levy of 2pc of their gross income. This amounted to €1,000 for someone earning €50,000.

After the health levy and income taxes, the €50,000 worker was left with €41,578, calculations by Cathal Maxwell of show. Tax and other deductions amounted to €8,422.

But a likely pay cut of 10pc has left this private sector worker with a gross salary of just €45,000.

The take from the universal social charge is close to €2,500.

Mr Maxwell calculated that the employee is paying tax and other charges of €8,727. This means the take-home pay has dropped to €36,273.

The worker has ended up paying an extra €305 in taxes and charges, despite earning €5,000 less.


Those on higher salaries have been hit far harder by the universal social charge (USC).

For someone on €100,000, the USC is extracting €5,619 from their earnings.

In contrast, the health levy cost him €2,000 in 2008.

Four years ago someone on €100,000 would have been left with €70,000 after income tax and charges.

Assuming a pay cut to take their gross salary down to €90,000 today, their after- tax income would now be €57,873.

This person has suffered a €10,000 pay cut and still ended up paying an additional €2,177 in tax and charges.

And the December Budget could see income and other work-related charges going up again.

Last month it emerged that the Government is planning to increase taxes on cars, drink and cigarettes, tax more people than before and cut back benefits for the elderly. Finance Minister Michael Noonan told the European Union and the IMF in a letter he will impose a new "value-based property tax".

This is one of five measures outlined for the Budget that are set to raise €1.25bn.

Also listed were: Cuts in tax reliefs; higher motor tax; higher excise duty and other indirect taxes; and a widening of the income tax base.

The document did not specify what extra income taxes are to be imposed but it notes that extra tax is coming in from the universal social charge.

Irish Independent

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