Help me with Taxamathics

Dannyboy83

Want to work out what the apprx real rate of tax will be; assuming flat taxes such as property/water are not delivered in this budget.

Working off this criteria:
http://www.revenue.ie/en/tax/it/leaflets/it1.html
===========================================

We know they want €1.5 billion from tax on Dec 7th.
We have 1.8 million people working in the country.
Apparently 40% of these people are outside the tax net.
So we'll take 1 million as the tax base.

Income tax take for 2009 was €11 billion I believe.
So they need to increase the income tax take by 14% to meet their target.
====================================================

The current SRCOP for 2010 is €36,400.
Lower tax band is 20%
Higher tax band is 41%
(ignoring the levies)

Looking at that very roughly, the lower tax band would need to increase to 25%, and the upper tax band would need to increase to 46% to yield 10% or €1.1 billion

Obviously that is oversimplifying it.

====================================================

Apparently the current avg industrial wage is €32k p.a.
So assuming the SRCOP is cut from €36,400 to €32,000 p.a.
(This would in effect be a reduction of 2.5 times the standard single PAYE Tax Credit which is €1,800 p.a.)

I have no idea regarding the specifics on how many people are over/under the avg. industrial wage and I didn't see any figures for it on CSO
=====================================================


Can anyone help me to get a more accurate picture?

Thanks
Dan

Nody

Easiest way is to go via some type of VAT route since this is more likely to hit everyone without it being seen (i.e. your net pay remains the same in your envelope and they take it out instead when you go shopping) and hence be less controversial.

This can then be combined with extensive roadwork on the roads to Newry etc. (roadwork always takes years to complete...) to limit the impact.

Cookie_Monster

I think the error you are making there is assuming those outside the tax net are going to stay outside it, I don't think they will.

PAYE & Single Person (etc) allowance will be cut and PAYE will rise 1-2% at the lower rate. The cutoff to higher band will also likely fall slightly and many other credits reduced: rent credit for example.

The combined Levy/PRSI will probably also rise by a percent or so

Rubik.

Last month a 1% hike in income tax was hinted at. A 1% on the standard 20% rate and higher 41% rate, it was said, would bring in around 500 million euro. I would imagine a significant number of that 40% outside the tax net will be brought back into it and there are existing tax reliefs that could go. How much that would yield, I don't know.

Dannyboy83

Nody wrote: »

Easiest way is to go via some type of VAT route since this is more likely to hit everyone without it being seen (i.e. your net pay remains the same in your envelope and they take it out instead when you go shopping) and hence be less controversial.

This can then be combined with extensive roadwork on the roads to Newry etc. (roadwork always takes years to complete...) to limit the impact.

The trouble is:
A) Vat is already at capacity, there is no room for vat increases (as are excise duties imo due to smuggling altho there will likely be a duty increase in alcohol)

People are already terrified of spending money, so a VAT increase probably wouldn't deliver even if it were increased.

Dannyboy83

Cookie_Monster wrote: »

I think the error you are making there is assuming those outside the tax net are going to stay outside it, I don't think they will.

Agreed about the tax net.
Unfortunately we have no figures to work off, but I'm assuming a 1% or 2% levy on the 40% outside the net is not going to yield much at all.
€100m max?
That's only 1/15th of the figure needed.

PAYE & Single Person (etc) allowance will be cut and PAYE will rise 1-2% at the lower rate. The cutoff to higher band will also likely fall slightly and

A 2% increase on both the new, reduced upper and lower bands is still only going to yield about 7/15ths at the max (from rough calculations).

That still leaves us far short of the required figure.

many other credits reduced: rent credit for example.

The combined Levy/PRSI will probably also rise by a percent or so

I don't see Rent credits falling as this would directly reduce property values and encourage rents downward. Falling property values/rents is very bad news for NAMA and for our soviet banks, who appear to be doing what they can to maintain an artificial floor or are expecting a tsunami of defaults soon.

Dannyboy83

Rubik. wrote: »

Last month a 1% hike in income tax was hinted at. A 1% on the standard 20% rate and higher 41% rate, it was said, would bring in around 500 million euro. I would imagine a significant number of that 40% outside the tax net will be brought back into it and there are existing tax reliefs that could go. How much that would yield, I don't know.

500mill is only 5/15ths of the required figure.

If a 1% increase on the upper and lower bands yield 500million, then my figures must be extremely inaccurate.

Agreed about tax reliefs going, but I think they are too shaky to rely on for any definite figures, because they are usually reliant on throughput.
Throughput always declines when it's tolled, even when there is no alternative.
(Health Insurance being a good example, the Health Insurance Levy cause many people to abandon private health insurance)

Riskymove

Dannyboy83 wrote: »

500mill is only 5/15ths of the required figure.

in other words a third!

in recent weeks there were articles about how much a 1% increase in tax bands would yield...but I cannot trace it.

The Tribune have a number of suggestions and they indicate:

Increase income levy rate from 2% to 3% €573m

Increase standard rate (20%) by 1% €420m

Increase higher rate (41%) by 1% €145m

Increase health levy by 1% €522m

http://www.tribune.ie/article/2010/nov/07/you-might-feel-a-slight-pinch-a-dozen-more-cuts-fo/

here are some other things I have found

Implementing the Commission on Taxation’s recommendations on the elimination of tax shelters (with the exception of taxing child benefit) would yield €552 million.

Capping tax relief on pension contributions would yield another €330 million, and consolidating PRSI and the income levies into a single levy charged at a low rate on all income could deliver another €200 million.

http://www.billtormey.ie/2010/10/12/varadkar-on-the-front-loading-budget-cuts/

Riskymove

I would add that excise duty and other similar taxes are also likely to be increased

Dannyboy83

Ah rite, feck it, try a different way.

Ignoring the 40% outside the net, because the yield from taxing them is so minimal anyway.

Going with a figure of 1,000,000 people as the tax base.
Need to extract €1,500,000,000 from this 1 million people

Which works out to:

€1,500 per person per annum, which is €125 per month for 12 months.

===============
So,

If we take €32,000 p.a. as the avg wage.
Then to extract €1,500 per annum, you are taking an extra 4.7% of their annual income.

Since a person on €32,000 p.a. never reaches the higher band;
that means the lower tax band has to increase from 20% to 24.7% in order to catch enough people.


I guess until there are specific figures about the amount of people X, earning the amount of money Y between A & B, then we are not going to be able to get any real detail.

But it does seem to show that lower paid people are probably going to be paying a lot more tax.

Riskymove

Dannyboy83 wrote: »

So,

If we take €32,000 p.a. as the avg wage.
Then to extract €1,500 per annum, you are taxing 4.7% of their annual income.

Since a person on €32,000 p.a. never reaches the higher band;
that means the lower tax band has to increase from 20% to 24.7% in order to catch enough people.

using the average industrial wage is limiting your analysis

also if you lower tax credits and the starting wage for the tax you can increase tax without changing rates

I guess until there are specific figures about the amount of people X, earning the amount of money Y between A & B, then we are not going to be able to get any real detail.

these are available...they have been posted before and I will try and track down

Riskymove

info from Ronan Lyons

http://www.ronanlyons.com/2009/07/28/a-little-quiz-on-irelands-income-tax/

Dannyboy83

Riskymove wrote: »

these are available...they have been posted before and I will try and track down

Appreciate it, Thank you

Dannyboy83

Riskymove wrote: »

info from Ronan Lyons

http://www.ronanlyons.com/2009/07/28/a-little-quiz-on-irelands-income-tax/

Followed a few links but they were broken.

Apparently his figures are based on a 2008 report from 2006 figures anyway.

He is also not including PRSI as Tax, which he explains in the commentary, helping to explain why the figures seem so low, but it is still deductible from income & leaving less room for further tax increases, so the end result is the same.

Liam Byrne

Dannyboy83 wrote: »

Ah rite, feck it, try a different way.

Ignoring the 40% outside the net, because the yield from taxing them is so minimal anyway.

Going with a figure of 1,000,000 people as the tax base.
Need to extract €1,500,000,000 from this 1 million people

Which works out to:

€1,500 per person per annum, which is €125 per month for 12 months.

But it does seem to show that lower paid people are probably going to be paying a lot more tax.

Unless they structure it so that people who can afford it; e.g. excluding those under, say, €25,000 and hitting those on €100,000+ more.

Also, don't forget that that €1,500 per annum is going to be further added to by property taxes and water charges.

People earning that amount can't afford to lose 10% of their income. I know for a fact that if I am asked for €1,500 extra and then say €500 water charges and €500 property tax then I may as well pack up and leave.

We can only hope, but given FF's kow-towing to those earning fortunes and walloping those trying to simply get by, I have my doubts.