Ibec: 52% cut would benefit half of taxpayers

More than half of taxpayers would benefit from a cut in the 52% marginal tax rate, according to the employers’ organisation, Ibec.

The claim is contained in a new report published today entitled ‘Debunking Irish tax myths,’ as the organisation continues to push for a reduction in the 52% rate it describes as “punitive” and which includes the 41% income tax rate, the universal social charge and PRSI.

Ibec says claims that such a cut would only benefit a small proportion of taxpayers are inaccurate and the personal tax burden should be eased to encourage employees to take on additional work.

“The marginal tax rate, which is now an eye-watering 52%, is a barrier to investment and job creation. It is a serious disincentive to work, taking a promotion or doing overtime. The suggestion that only a small number would benefit from a cut to the marginal rate is often repeated, but is wrong. Around half of taxpayers pay at the marginal rate,” said Ibec head of policy and chief economist, Fergal O’Brien.

Earlier this month, the Taoiseach indicated that the marginal rate of tax would be reduced in this year’s budget and in two subsequent years as well.

Independent think-tank, Tasc however disputed government claims that the move would benefit low-and middle-income families, saying that only the top one in six earners would profit.

The organisation repeated this claim again yesterday, insisting that the debate on the marginal rate of tax is misleading as nobody pays the 52% rate.

“When USC and PRSI are included, actual tax paid is far lower than the 52% marginal rate,” said Tasc research director, Dr Nat O’Connor.

Ibec’s research, based on an analysis of Revenue and international tax statistics, also finds that Ireland is the fifth highest personal income tax jurisdiction in the EU after increases which saw taxation income rise from 8.7% of national income to 11.6%, since 2010.

The report also suggests that middle and high earners pay the vast majority of tax with those earning upwards of €39,000 paying more than their OECD counterparts while low earners pay less than the OECD average.

Specifically, Ibec is advocating that the Government increase the entry point of the marginal tax rate from €32,800 to €34,800; reduce the marginal rate from 52% to 51%; discontinue the pension levy; and reform the universal social charge so self-employed and PAYE workers are treated the same.