Income tax take from high earners down 9.4%

Income tax revenue from high-earners fell by 9.4% in 2014 as a result of a sharp decline in the number of wealthy business people liable for such payments.

A new analysis by Revenue of high-net worth individuals liable for tax shows they paid €54.73m in 2014 — a reduction of €5.7m on the previous year and the lowest level since 2010.

The number of high earners subject to restrictions on the amount of tax relief they can claim decreased by almost 14% — down 125 to 709.

However, the average amount of income tax paid per individual rose to €70,256 compared to €66,847 in 2013.

Measures to limit the use of certain tax reliefs and exemptions by high earners were first introduced in January 2007 to close tax loopholes.

The object of the initiative was to ensure that individuals who earned €500,000 or more paid an effective income tax rate of about 20%.

Further limitations were implemented in 2010 which moved the restrictions to individuals earning €400,000 paying an effective rate of 30%, while the threshold at which they began to apply was reduced to anyone earning over €125,000.

Among the reliefs that are restricted are area-based property tax incentives, the Business Expansion Scheme, film investment relief as well as exemptions relating to artists’ income.

Others include investment in woodlands and relief for interest paid on loans used to acquire an interest in a company.

In its latest analysis, Revenue expressed satisfaction that such high earners had met the objective of paying an effective income tax rate of 30% during 2014.

It revealed that 183 high-income individuals with an income over €400,000 had paid an average effective income tax rate of 30.7% which rose to 40.6% after the universal social charge was included.

Revenue said the use of the restrictions has resulted in tax returns of €35.2m which would not otherwise have been paid to the Exchequer.

Furthermore 59 of the 183 high earners would have paid no tax at all and were only brought into the tax net due to the existence of the restrictions.

Revenue reported over €213.3m in reliefs claimed in 2014 with over €111.5m relating to the carrying forward of excess relief and €27.5m for the writing down of allowances for capital expenditure on hotels and holiday homes.

Nine individuals declared income of over €2m in 2014.

Without the application of the restrictions they would have paid an average income tax rate of 11.2%.

Instead, their effective rate became 31.6% once the restrictions were applied and 44.4% with USC added. Another 34 individuals declared income of €1m to €2m.

A further 596 high-income individuals who earned €125,000 to €400,000 to whom the restrictions apply on a graded basis, paid an average effective income tax rate of 19.5% which rises to 29.8% with the addition of USC.


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