Written answers

Tuesday, 29 January 2013

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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To ask the Minister for Finance the projected cost in 2013 and 2014 to the Exchequer of allowing millionaires to direct their tax relief on charitable donations to the approved body of their choice if the charitable donations scheme is removed from the scope of the high earners' restriction; and if he will make a statement on the matter. [4422/13]

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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To ask the Minister for Finance the reason the decision to remove the charitable donations scheme from the scope of the high earners' restriction up to an annual donation limit of €1 million per individual was not announced during his Budget 2013 speech or associated documentation at the time; and if he will make a statement on the matter. [4423/13]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 277 and 278 together.

I announced in the recent Budget my intention to simplify the scheme of tax relief for donations to approved bodies. Details of all of the simplification measures, including those set out by the Deputy were provided in Annex E of the Budget book. I am unable to provide a projected cost for this measure as it is not possible to anticipate the level of donations that donors might make. In addition, in order to provide an estimate, it would be necessary to know the level of incomes and consequent income tax liabilities of such donors. However, the simplification measures when taken together are designed to be Exchequer neutral.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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To ask the Minister for Finance the rationale for allowing millionaires to direct their tax relief on charitable donations up to €1 million to the approved body of their choice when it will remove moneys from the public Exchequer, that could be spent on vital services; the evidence there is that wealthy persons require State support to donate their accumulated wealth to approved bodies; and if he will make a statement on the matter. [4424/13]

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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To ask the Minister for Finance if he will confirm that the maximum tax relief on charitable donations up to €1 million that a millionaire can direct towards the approved body of their choice, under the scheme as proposed, in a year will be €310,000; his views that it is fair that a wealthy person will be able to decide the way in which their taxes are spent; and if he will make a statement on the matter. [4425/13]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 279 and 280 together.

Donations to charities and other approved bodies qualify for tax relief where the amount donated to any one such body is €250 and above. Previously, self-assessed individuals were able to claim the tax relief due on these donations while charities claimed the relief in respect of donations made by PAYE workers. In the recent Budget I announced measures to simplify the scheme of donations to approved bodies. One of these will mean that tax relief in all cases will now be refunded directly to the charity. Therefore, self-assessed individuals will no longer have the benefit of tax relief in respect of their donations.

In addition, and as recommended by the Forum on Philanthropy and Fundraising, I have imposed a maximum limit of €1 million per annum on individual donations which can be tax relieved. There was no limit on the donations scheme prior to this. Any tax relief due will be paid to the charity on a ‘grossed-up’ basis as has always been the case in respect of donations from individuals within the PAYE collection system. This means that the tax relief due is calculated with reference to the amount a donor would have had to have earned in order to be left with the amount donated after income tax. In the new regime, a blended rate of relief of 31% will apply regardless of the marginal tax rate paid by the donor. Therefore, a donation of €1 million to a single charity from a self-assessed (and PAYE) taxpayer will result in a tax refund of €449,275 to the charity, provided the individual has paid sufficient Income Tax.

Prior to these amendments the donor would have received a refund of €410,000 on a donation of €1 million. However, this relief would have been subject to the high earners’ restriction which imposes a maximum relief amount that could be claimed of €80,000 or 20% of adjusted income in any one tax year. Depending on the income of the donor it is possible that the full relief amount could have been claimed in a single tax year. Where the individuals’ income was not sufficient to absorb all of the relief due, any unclaimed amount could be carried forward and claimed in subsequent years. It is worth noting that notwithstanding the application of the high earners’ restriction, prior to the changes I announced, there was no limit on the amount of donation that could attract tax relief.

One of the aims of the donations scheme is to encourage philanthropy amongst those with high incomes, although some surveys show that tax relief is not the only factor that donors take into account when making a donation. However, I would like to assure the Deputy that the scheme operates to ensure that no benefit can accrue to the donor in respect of their donations.

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