Tax changes for wealthy under fire

TAX changes aimed at the wealthy will only bring in 25% of the money saved by hitting social welfare recipients, it was claimed last night.

In his budget address yesterday Finance Minister Michael Noonan said he wanted to ensure that “people with wealth pay their fair share”.

In his speech he outlined a number of measures, including:

* Increasing the current rate of capital acquisitions tax from 25% to 30% from today.

* Increasing capital gains tax from 25% to 30% from today.

* Reducing the Group A tax-free threshold for capital acquisitions tax from €332,084 to €250,000.

* Increasing DIRT from 27% to 30%.

* Broadening the base for PRSI through removal of the remaining 50% employer PRSI relief on employee pensions.

* Further broadening of the base for PRSI to cover rental, investment and other forms of income from 2013.

* Increasing the rate of notional distribution on the highest value approved retirement funds (ARF) and similar products to 6%

* Increasing the rate of tax on the transfer of an ARF on death to a child over 21 from 20% to 30%.

Mr Noonan also said he would scrap the “citizenship” condition for payment of the domicile levy so as to ensure that tax exiles cannot avoid it by renouncing their citizenship and that he would keep the issue of the tax treatment of tax exiles under “constant review”.

On the last measure Jim Ryan, tax partner with Ernst and Young, said the domicile levy introduced last year had impacted on fewer than a dozen people and had “yielded insignificant amounts of revenue”.

“In a move to increase the tax take the minister has announced a tightening of the provisions with the affect that any individual who is domiciled in Ireland, but not resident, will be liable to the levy irrespective of whether they are an Irish citizen or not,” he said, adding: “It is difficult to predict how mush revenue this change to raise, and interestingly the minister has not sought to provide any indicative figure.”

Opposition parties said that the measures did not go far enough.

While Mr Noonan said the rate of tax applying to capital, interest and earnings — through the high earners’ restriction — are all aligned at 30%, the Unite trade union claimed that the likely tax hike from the measures would only equate to about 25% of the savings being affected by changes to payments to those on social welfare.

Rob Hartnett of Unite said: “Our estimate is that they would raise about 25% of the reduction being applied to social welfare payments, and that does not include other areas like education.”

He added that the tax changes announced by the minister yesterday were just “a small fraction of what is both sustainable and what should have been introduced”.

However, Jim Ryan of Ernst and Young said the figure could be even less than 25%.