Breeda Moynihan-Cronin (Kerry South, Labour)
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Question 116: To ask the Minister for Finance the expected distribution of income earners for income tax payments for 2005 and 2006 broken down in number and percentage terms into the categories of exempt, marginal relief, standard rate and higher rate; the estimate of the number of people with an income in excess of €100,000 and in excess of €1million that will have a zero rate of income tax or a less than 5% rate of income tax for 2005 and 2006; and if he will make a statement on the matter. [39228/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I am advised by the Revenue Commissioners that the information requested by the Deputy in relation to the distribution of income earners is set out in the following table:

The above figures allow for the fact that many income earners pay no tax at all; many pay tax at a standard rate but pay a much lower average rate because of the application of credits. And for many taxpayers who are, strictly speaking, liable for tax at the higher rate on part of their income, the amount of their liability at the higher rate is fully offset by their tax credits. In fact, tax credits fully offset the 42% liability in the case of all but about 20% of all income earners. Effectively, therefore, many of the 'top rate' taxpayers actually pay at an average rate of 20% or less.

Note: Figures in the above table are rounded to the nearest hundred and any apparent discrepancies in totals are due to this. In addition, the figures are provisional and subject to revision.

The figures are estimates from the Revenue tax forecasting model using actual data for the year 2003 adjusted as necessary for income growth for the years in question.

The most recent basic data on incomes available from which the information requested by the Deputy in relation to effective tax rates could be derived is in respect of the income tax year 2003. If the effective rate of income tax for each income earner in 2003 is calculated as the percentage of total tax liability to total income, the number of income earners with no net liability for income tax or a net liability for income tax of less than 5% rate is estimated as follows:

These figures take account of Deposit Interest Retention Tax paid.

To arrive at the figure for total income the gross income is reduced by various relevant deductions and allowances such as capital allowances, losses, allowable expenses and retirement annuities.

It might be noted that for 2003, the tax liability of those earning over 100,000 (gross income) represents 30.3% of the total income tax liability for 2003. In addition, the effective rate for those earning over 100,000 in 2003 is 32.5%. This compares with an effective rate for those earning 100,000 or less in 2003 of 13.2% and an effective rate for all income earners in 2003 of 16.1%.

A married couple who have elected or have been deemed to have elected for joint assessment is counted as one tax unit.

The information on incomes is based on income returns on Revenue records at the time the data were compiled for analytical purposes, representing about 96 per cent of all returns expected.