Income tax revenue reduces as number of high earners falls

Income tax revenue from high earners fell by 4.4% in 2013 due to a sharp decrease in the number of high net worth individuals liable for such tax.

An analysis by the Revenue Commissioners of the High Income Individuals’ Restriction shows that 904 high-wealth individuals paid income tax under the measure in 2013 — a decrease of 146 on the previous year.

Income tax paid by such wealthy businesspeople fell by €2.72m to €60.4m.

However, the average amount of income tax paid per individual rose to €66,847 in 2013 compared to €60,200 in 2012.

A total of 41 individuals declared income in excess of €1m in 2013, with 13 having income of €2m or more.

Such millionaires paid out €26.5m in income tax and €9.4m more than if the restrictions were not in place.

The restrictions which limit the use of certain tax reliefs and exemptions by wealthy businesspeople were first introduced in 2007 in order to close tax loopholes.

Further measures were brought in in 2010 with the objective of ensuring that individuals with an adjusted annual income of over €400,000 paid an effective income tax rate of approximately 30%.

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.

Revenue said the findings of its analysis confirmed the 30% income tax rate target had been achieved in 2013.

The tax authorities pointed out that 231 individuals with an adjusted income of €400,000 or more paid an average effective income tax rate of 30.3% in 2013 — a figure which rose to 40.5% when the Universal Social Charge is included.

Revenue said an extra €40.7m was raised in tax from such income than if the restriction had not applied.

In addition, 673 high earners with an adjusted annual income of less than €400,000 paid €19.7m more in tax than would otherwise have been paid.

They paid an average tax rate of 18.9%, rising to 29.2% when the USC was included. However, the restrictions which apply to them come into effect on a graduated basis.

The study reveals relief worth €236.3m were claimed, including €1.26m by 12 individuals in relation to exemption from income or profits relating to the works of artists, writers or composers.

A total of 214 people claimed almost €34.7m in reliefs for writing down allowances in respect of capital expenditure on hotels and holiday camps and cottages.

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