Thursday, 25 October 2018
Ceisteanna - Questions - Ceisteanna ar Sonraíodh Uain Dóibh - Priority Questions
2. To ask the Minister for Finance the steps he will take to ensure high wealth persons pay an appropriate level of tax in view of the information contained in the recent Comptroller and Auditor General report. [44237/18]
The Comptroller and Auditor General report states that there are 140 high-wealth individuals, millionaires 50 times over, who had a taxable income of less than €125,000. Some 83 of these people have taxable income of less than the average worker. Clearly, there are those in society who are not paying their fair share. Will the Minister commit to bringing in the necessary changes to close these loopholes and exemptions?
As the Deputy will be aware wealth is already taxed in a range of ways. The local property tax is based on the market value of residential properties. Capital acquisitions tax and capital gains tax are levied at 33% on the sale of assets. Bank interest in most cases is subject to deposit interest retention tax and the stamp duty levy on the transfer of shares yielded a net total of €449 million in 2017.
The Comptroller and Auditor General's report notes that both taxable income and income tax payable are determined in accordance with tax legislation which provides the tax expenditures in the form of tax reliefs and tax credits. Such credits and reliefs, where applicable, have the effect of reducing the tax liability of an individual in any given year of assessment. As also stated by the Comptroller and Auditor General in his report, while high earners are well placed to utilise a wide variety of credits and reliefs available, they may also be liable to pay additional tax by virtue of their income in the form of the domicile levy and the high income individual's restriction. This status is determined by assets rather than income, while under the high income individual's restriction, high income earner status relates to those with adjusted income of over €125,000.
The Comptroller and Auditor General's report notes that in 2015, high wealth individuals paid an effective tax rate, including income tax, PRSI and USC, of 39.2% compared with an average rate for all taxpayers of 16.3%. Under the high income individual's restriction, where adjusted income is up to €400,000, a tapered approach ensures that there is a graduated application of this restriction, with the effective rate of income tax increasing towards 30%, as adjusted income increases towards €400,000.
We all appreciate the work of the Revenue Commissioners, and in fairness, on some issues where my colleague Deputy Doherty and others have identified unintended or unjustifiable tax breaks, the Department, the Minister and the Revenue Commissioners have acted. There are concrete steps that could be taken here that have been ruled out. For example in Britain all taxpayers with income over €100,000 have to fill out a tax return. That might merit consideration even at a higher level.
One of the striking parts of the Comptroller and Auditor General's report was how high the threshold in this State is to be considered a high wealth individual. At €50 million it is very high compared to €10 million in Spain or €5 million in South Africa. This threshold should be lower. Imagine what we would be looking at if there were cases of €20 million and €30 million being considered. The methods to reduce tax liability are well known to us. The use of credits and reliefs, in particular, serve an important role in reducing the tax burden for low earners but for high earners they should be phased out. The evidence points to tax avoiders having the upper hand in the race between the hound and the hare. The result is millions of euro foregone in tax that should be paying our nurses, being invested in our economy and reducing our debt. Will the Minister consult with the Revenue Commissioners in reducing the threshold and will he beef up anti-avoidance rules in the Finance Bill?
Any input I get from the Revenue Commissioners in relation to anti-avoidance rules or anything that needs to be done to deal with tax evasion on an individual or a systemic basis I act on.
The policies that we have in place now, I believe, are effective and proportionate. The reason for this belief is backed up by the figures on those, for example, earning more than €400,000. In this example, the 2016 report in this area shows that 149 high income individuals, with an adjusted income of €400,000 or more paid an effective average tax rate of 30.1%. When I include the universal social charge in this, the average tax rate they paid was 40.9%. Anybody over that level of income face a rate of tax that is proportionate to the income that they have. Those who have more should pay more. The tax code that we have in place delivers that.