Dáil debates
Tuesday, 20 November 2007
Tax Policy.
2:30 pm
Brian Cowen (Laois-Offaly, Fianna Fail)
In budget 2006 I announced the introduction of a limit with effect from 1 January 2007 on the use of tax reliefs, including certain exemptions by some high-income individuals. This measure was designed to address the issue of a small number of individuals with high incomes who, mainly by means of the cumulative use of various tax incentive reliefs, have been able to reduce their income tax liability to a very low level or to zero. Such individuals are no longer able to do so. This provision ensures that such individuals who use tax incentive schemes will have an effective rate of income tax for each year of not less than approximately 20% on the income sheltered by such schemes.
The method used to increase the rates at which these high income individuals pay tax effectively addresses the equity concerns raised over the past number of years while at the same time ensuring the intended incentive effects of tax schemes will continue to be delivered.
I am informed by the Revenue Commissioners that the most recent basic data on incomes available from which information of the type requested by the Deputy could be derived are in respect of the income tax year 2004. The data are set out in detail in the table. The figures show that in 2004, of the 2,544 people with incomes in excess of €500,000, 21% had an effective rate of tax of 20% or less. Within this category, 7% had an effective rate of 5% or less. The data also show that 79% had an effective rate in excess of 20%. It should be noted these figures are historical and predate the changes I have outlined in regard to the restriction of reliefs.
| Income tax 2004 | ||||
| Numbers of all income earners with incomes exceeding €500,000 and their effective rates of tax(1) | ||||
| Range ofGross Income(2) | Effective Rate of Tax | Effective Rate of Tax | Effective Rate of Tax | Overall |
| Number | Number | Number | Number | |
| 500,000 to 550,000 | 31 | 55 | 354 | 440 |
| 550,001 to 600,000 | 16 | 43 | 266 | 325 |
| 600,001 to 650,000 | 19 | 33 | 213 | 265 |
| 650,001 to 700,000 | 17 | 26 | 170 | 213 |
| 700,001 to 750,000 | 7 | 18 | 144 | 169 |
| 750,001 to 800,000 | 8 | 22 | 129 | 159 |
| 800,001 to 850,000 | 10 | 11 | 83 | 104 |
| 850,001 to 900,000 | 9 | 8 | 73 | 90 |
| 900,001 to 950,000 | 7 | 11 | 61 | 79 |
| 950,001 to 1,000,000 | 3 | 10 | 48 | 61 |
| Over 1,000,000(3) | 57 | 114 | 468 | 639 |
| 184 (7.2%) | 351 (13.8%) | 2009 (79%) | 2,544 | |
| (1)The effective rate of tax is calculated by dividing the income tax payable in a year by the income declared for that year and expressing the result as a percentage. | ||||
| (2)Gross income is income before adjustments are made in respect of capital allowances, interest paid, losses, allowable expenses, retirement annuities etc. but after deduction of superannuation contributions by employees. | ||||
| (3)Because of the Revenue Commissioners' obligation to observe confidentiality in relation to the taxation affairs of individual taxpayers and small groups of taxpayers, the breakdown by income bands requested by the Deputy is not provided in regard to incomes exceeding €1 million due to the small numbers of income earners with incomes in excess of that level. |
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