Richard Bruton (Dublin North Central, Fine Gael)
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Question 145: To ask the Minister for Finance the number of people taxed under the self-assessed system in each of the past five years; if the Revenue Commissioners have a policy of switching people with mixed PAYE and other income to a self-assessed basis; and the extent to which this has influenced the trend. [8633/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The numbers of self-assessed income earners whose main source of income is from non-PAYE sources are set out as follows.

The numbers above have been rounded to the nearest 100 as appropriate. The numbers of income earners for the years 2003, 2004 and 2005 are based on actual data for 2002 projected forward in accordance with macro-economic data relating to actual and expected growth in incomes and employment. A married couple who has elected or has been deemed to have elected for joint assessment is counted as one tax unit.

The Revenue Commissioners do not have a policy of switching people with mixed PAYE and other income to a self-assessment basis. Whether an individual comes within the self-assessment system is determined by whether they are deemed a "chargeable person" under section 950 of the Taxes Consolidation Act 1997. An individual whose income is derived solely from PAYE is excluded from self-assessment. However, an individual having both PAYE and non-PAYE income is strictly within the self-assessment system. For ease of administration, Revenue accepts that an individual whose net income from non-PAYE sources is €3,174 or less will continue to be taxed under PAYE and the non-PAYE income will be "coded in" against their tax credits.

Section 14 of the Finance Act 2005 amended the definition of a "chargeable person" for self-assessment purposes. This permits Revenue the discretion to look at an individual's gross non-PAYE income when deciding on assessment status.

For the 2005 tax year and subsequent years of assessment, substantial gross income is defined as gross non-PAYE income of €50,000 or more, for example, gross income from a trade or profession, gross rental income, dividends and distributions or foreign income and so on. An individual with PAYE income who also has substantial gross income from a non-PAYE source, but where this income has been reduced to nil or to a negligible amount because of deductions, losses, allowances and other reliefs, is regarded as a "chargeable person" and is required to make a return under the self-assessment system.

Except as outlined above, there is no change to the practice for individuals whose main source of income is subject to PAYE but who have assessable non-PAYE income of less than €3,174. These individuals can continue to have the liability on such income effectively assessed within PAYE by means of coding in the income against their tax credits. An individual with assessable non-PAYE income of more than €3,174 for any year is regarded as a "chargeable person" for self-assessment purposes and must file a Form 11 for that year. There are no indications that this practice has influenced the upward trend in the number of people who are taxed under the self-assessment system.

Richard Bruton (Dublin North Central, Fine Gael)
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Question 146: To ask the Minister for Finance the trend in tax relief on donations for the PAYE sector and self-assessed sector over the past five years; and if his attention has been drawn to the fact that the much more generous way of crediting tax relief on PAYE than on self-assessed has resulted in declining charity revenue when taxpayers become self-assessed. [8634/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The current scheme for tax relief on donations to approved bodies, which includes donations made to charities, is governed by section 848(a) of the Taxes Consolidation Act 1997. The scheme was introduced in the Finance Act 2001 and claims under the scheme arose from 2002 onwards. Arrangements for allowing tax relief for donations depend on whether the donor is a PAYE taxpayer or an individual on self-assessment, or a company. For a PAYE taxpayer, the relief is given on a grossed-up basis to the approved body rather than by way of a separate claim to tax relief by the donor. For example, if an individual who pays income tax at the higher rate gives a donation of €580 to an approved body, the body will be deemed to have received €1,000 less tax of €420. The approved body, such as a charity, will therefore be able to claim a refund of €420 from the Revenue Commissioners at the end of the tax year. Similarly, if a standard rate taxpayer makes a donation of €800 to an approved body, the approved body will be able to claim a refund of €200 from the Revenue Commissioners at the end of the tax year.

In the case of a donation made by an individual who pays tax on a self-assessment basis and by companies, it is the donor and not the recipient of the donation who claims the relief. For example, if a self-assessed individual who pays tax at the higher rate gives a donation of €1,000 to an approved body, the donor will be able to claim a refund of €420 from the Revenue Commissioners at the end of the tax year. The donation can be claimed as a deduction against the individual's income from all sources. The claim to the relief is made with the individual's normal tax return. There is a presumption that potential donors will be aware of the tax relief available and how it will be applied in particular cases, and that the level of the donation will reflect that knowledge.

The following figures cover the cost to the Exchequer of the scheme for donations to approved bodies for the years 2002 to 2005, inclusive.

With regard to figures for donations by self-assessed donors, the only data available is for the tax year 2002. In that year 5,885 self-assessed donors made claims under the terms of the scheme, at a cost of €5.1 million to the Exchequer. Preliminary information on the tax year 2003 indicates that the figures will be of a similar order. There is no evidence of a reduction in charity revenue, as suggested by the Deputy. The reduction in the amount donated in 2004 compared with 2003 is due to the introduction in the Finance Act 2003 of a maximum limit on the amount of a donation that can attract relief where the donation is made by an individual to a charity or approved body with which he or she is associated. In such a case, where the aggregate of donations to any one charity or approved body in a year is in excess of 10% of the individual's total income, the excess does not attract tax relief.

The scheme of tax relief for donations to charities and approved bodies was one of the schemes reviewed as part of the internal review of certain tax schemes carried out by my Department in conjunction with the Revenue Commissioners last year. The review recommended that no change be made to the structure of the scheme at this stage.