Income tax, PRSI, USC

Idbatterim

Hey, so I am of the opinion that to be earning a meagre 32,800 and paying 52c in the euro or 55c if self employed is outrageous and immoral, was watching the front line last night, think it was an episode from Monday and even Pat Kenny was saying this and making comparisons with the uk and germany, where I believe even their top rates are less and come in at over £100,000 and nearly €250,000 respectively.

The question is often asked of what is "rich" and "wealthy" well surely this is anyone earning over E32,800 if single, as to be taking that amount, you would want to be.

Mr Noonan (who was being interviewed on Frontline) also agrees, and says thats why they didnt hike the rates (whatever about the thresholds) and says ideally he would like to lower the upper rate, although this is off the agenda for the time being unfortunately...

In my line of work and in some other semi related lines, there are many people who I know of first hand, who will not take on any work if it brings them over the 32,800 or 40 odd k if they are married.

Opinions?

Cookie_Monster

while you may be paying 52c over that level by the time you take into account all the credits and whatnot the total tax amount drops down considerably, so a person on 40k for example pays a total tax, USC and PAYE of 24.8% (http://www.deloitte.ie/tc/Default.aspx)

On 32,800 only 18.8% is paid. In both cases the actual rate is well below the headline rates of 20% or 41% plus USC and PAYE so in reality it's nowhere near as bad as first made out.

The lower rate needs to be upped (via removal of tax credits) to broaden the base and the higher rate needs to be cut. High earners should not be overly burdened just for the sake of it and everyone should pay their share.

hfallada

Tax rates in Germany are much much higher at top rates. Plus church tax of 10% is put on your income which you have to pay if you want to get married or have a funeral in a catholic church / protestant church.

In the uk you pay income tax at £8,900. Like Germany has a lot of tax bands. Half of all income earners in Ireland pay no income tax in 2010. That might have changed since the USC.

However unless welfare is cut and income tax is put on low income earners there is little incentive to work. One thing thats to be addresses is the fact oap have a tax credits for being over 70. Why??? They need to be abolished. They're is no reason why oap should pay less tax than a young person who needs to pay for their child, housing, etc.

Geuze

sOLUTION:

Reduce max MTR to 50%.

Increase ATR.

How?

Abolish age tax credits for people aged 65+.

Abolish income tax exemptions for people aged 65+

Abolish DIRT exemption.


Tax

Merger USC back into tax.

Four rates: 20, 30, 40, 50.

50% on income over 100k.

NB: this means a lower top MTR than now, as 52/55 drops to 50.

The crazy situation that people on 33k face a MTR of 52% to be gone forever.



PRSI

Abolish PRSI exemption - more workers to pay PRSI.
Re-introduce small PRSI-free allowance of 100 pw, to ease cost on low earners.
Reintroduce PRSI ceiling, like all other countries have. Say 100k.
Double PRSI from 4% to 8%, more in line with other countries and to fund the SIF.



Actual effective MTR:

0% on initial income
8% PRSI kicks in at 100 pw.
Tax at 20% starts at 300pw, MTR is 28%.

Then MTR steps up to 38, then 48, then at 100k PRSI stops, and MTR is 50%

Barracuda1

Idbatterim wrote: »

Hey, so I am of the opinion that to be earning a meagre 32,800 and paying 52c in the euro or 55c if self employed is outrageous and immoral, was watching the front line last night, think it was an episode from Monday and even Pat Kenny was saying this and making comparisons with the uk and germany, where I believe even their top rates are less and come in at over £100,000 and nearly €250,000 respectively.

The question is often asked of what is "rich" and "wealthy" well surely this is anyone earning over E32,800 if single, as to be taking that amount, you would want to be.

Mr Noonan (who was being interviewed on Frontline) also agrees, and says thats why they didnt hike the rates (whatever about the thresholds) and says ideally he would like to lower the upper rate, although this is off the agenda for the time being unfortunately...

In my line of work and in some other semi related lines, there are many people who I know of first hand, who will not take on any work if it brings them over the 32,800 or 40 odd k if they are married.

Opinions?

Shift the Tax burden to property and merge the USC with PRSI so the government will have to borrow alot less to fund social welfare. In the UK national health is 11.75% for employees. I agree with PRSI starting at 100 p/w

Ogham

We are not that bad in Ireland as people try to make out. Especially for the lower paid .See the figures here that say deductions are 34% for someone earning 54k


http://www.moneyguideireland.com/personal-taxation-levels-in-ireland.html

monkeypants

Idbatterim wrote: »

even Pat Kenny was saying this

Don't use a man who makes over €500k a year working part time and steals from his neighbours as a compass.

Geuze

I know a couple on 50k approx, paying 5% income tax in 2010 and 2011.

Unbelieavably low, great country.

No wonder the fiscal deficit is huge!!!!!!!

Scortho

Geuze wrote: »

I know a couple on 50k approx, paying 5% income tax in 2010 and 2011.

Unbelieavably low, great country.

No wonder the fiscal deficit is huge!!!!!!!

How?
Can you put me in touch with there accountant???:D

StigmaMan

What about a major tax reform..? I will post a proposal in a new thread..

djpbarry

Idbatterim wrote: »

Hey, so I am of the opinion that to be earning a meagre 32,800 and paying 52c in the euro...

Eh? A single person on €32,800 per annum will lose about 18.8 cent in every Euro to deductions. For the purposes of comparison, someone in the UK on a similar income (about £27,200) will lose about 21.6 pence in every pound to deductions and then they have to pay council tax on top of that (average of about £1,400 per annum per household).

Riskymove

djpbarry wrote: »

Eh? A single person on €32,800 per annum will lose about 18.8 cent in every Euro to deductions.

the 52% figure quoted is I believe related to the marginal tax you pay on every €1 over a certain amount - in this case when you move into the higher tax bracket

so while its true you pay 52c in every €1 you earn over the €32,800 you are not paying 52% on all your income

A Scoundrel

Riskymove wrote: »

the 52% figure quoted is I believe related to the marginal tax you pay on every €1 over a certain amount - in this case when you move into the higher tax bracket

so while its true you pay 52c in every €1 you earn over the €32,800 you are not paying 52% on all your income

Last time I checked, it was mathematically impossible to be taxed at 52% (effective) as a PAYE worker in the Republic of Ireland.

Of course, if you remove a chunk of your income for a private pension or whatever, that's your perogative.

But as far as the exchequer is concerned, no PAYE employee will ever pay an effective tax contribution as high as 52%. Ever.

Cookie_Monster

A Scoundrel wrote: »

Last time I checked, it was mathematically impossible to be taxed at 52% (effective) as a PAYE worker in the Republic of Ireland.

Of course, if you remove a chunk of your income for a private pension or whatever, that's your perogative.

But as far as the exchequer is concerned, no PAYE employee will ever pay an effective tax contribution as high as 52%. Ever.

no, not in total but on any marginal income. It's a huge disincentive to do any extra work

Idbatterim

look I couldnt care less what way people spin it! Any income over 32,800 I do pay tax at 52%. My issue isnt with the lower rates, up to E32,800 people arent paying enough in my opinion, but once on the marginal rate, its insanity. I have people everyday turning down hours I offer them at E25 per hour, they can earn up to E32,800 per year and pay little in fairness, after that they get gouged, I'd do the same in their position...

In the Uk, you dont pay the highest rate until you hit E181,000 & even then its 45%.

https://www.gov.uk/income-tax-rates

sock puppet

Idbatterim wrote: »

In the Uk, you dont pay the highest rate until you hit E181,000 & even then its 45%.

https://www.gov.uk/income-tax-rates

Because no one in the UK has ever had to pay social insurance.

AlmightyCushion

sock puppet wrote: »

Because no one in the UK has ever had to pay social insurance.

Even with NI contributions it works out about the same as our marginal rate but it kicks in at £150,000 as opposed €33,000 here.

Idbatterim

Because no one in the UK has ever had to pay social insurance.

Right, so the above poster reckons marginal rate is roughly the same with social insurance, I have no reason to doubt that. so you can earn approximately 5.5 times more, before paying an extortionate rate. Your right, lets argue over a few percent, not the 5.5 x earnings multiple :rolleyes: I'm just so glad, that at a massive income of 33k that I am deemed so well off, that 52% of my income can be confiscated, for use on our excellent value Public Service, public procurement, world class welfare etc...

sock puppet

Idbatterim wrote: »

Right, so the above poster reckons marginal rate is roughly the same with social insurance, I have no reason to doubt that. so you can earn approximately 5.5 times more, before paying an extortionate rate. Your right, lets argue over a few percent, not the 5.5 x earnings multiple :rolleyes: I'm just so glad, that at a massive income of 33k that I am deemed so well off, that 52% of my income can be confiscated, for use on our excellent value Public Service, public procurement, world class welfare etc...

So what's the marginal rate of someone on £35,000 as opposed to say €40,000, including income tax, social insurance and employer's PRSI/NI?

Idbatterim

I just did a quick calculation on 80k sterling v the euro equivalen gross pay, take home pay is E57189 in Ireland and E64350 in Uk.

Earn £80,000 in 2013/2014 and you'll take home £53,363. This means £4,447 in your pocket a month.


Over the year you'll pay £21,822 income tax and £4,815 in National Insurance.

http://www.moneysavingexpert.com/tax-calculator/

Calculated Results
2014 2013
Total Income €96,500.00 €96,500.00
Your Income €96,500.00 €96,500.00
Loan BIK €0.00 €0.00
Vehicle BIK (1) €0.00 €0.00
Health Insurance BIK €0.00 €0.00
Qualifying Pension Deduction (€0.00) (€0.00)
Carer Allowance (€0.00) (€0.00)
Tax @ Lower Rate (20 %) €6,560.00 (20 %) €6,560.00
Tax @ Higher Rate (41 %) €26,117.00 (41 %) €26,117.00
Tax Credits (€3,300.00) (€3,300.00)
Net Tax (€29,377.00) (€29,377.00)
PRSI (€3,860.00) (€3,860.00)
Universal Social Charge (€6,074.00) (€6,074.00)
Annual Net Income €57,189.00 €57,189.00
Monthly Net Income €4,766.00 €4,766.00
Weekly Net Income €1,100.00 €1,100.00

K-9

AlmightyCushion wrote: »

Even with NI contributions it works out about the same as our marginal rate but it kicks in at £150,000 as opposed €33,000 here.

But National Insurnace was always paid on pretty low wages, we can't compare on that level.

sock puppet

I don't think you'll find anyone that thinks high earners pay low taxes through PAYE. Your contention seemed to be that the marginal rate kicked in too early.

But marginal tax rates are often like that. In the UK the effective marginal tax rate for low earners can be over 70%. It's similar in the US

Riskymove

A Scoundrel wrote: »

Last time I checked, it was mathematically impossible to be taxed at 52% (effective) as a PAYE worker in the Republic of Ireland.

Of course, if you remove a chunk of your income for a private pension or whatever, that's your perogative.

But as far as the exchequer is concerned, no PAYE employee will ever pay an effective tax contribution as high as 52%. Ever.

add PAYE, USC, PRSI and if on the top rate you get 52% for PAYE

I think self-employed pay 55%

Geuze

A Scoundrel wrote: »

Last time I checked, it was mathematically impossible to be taxed at 52% (effective) as a PAYE worker in the Republic of Ireland.

Of course, if you remove a chunk of your income for a private pension or whatever, that's your perogative.

But as far as the exchequer is concerned, no PAYE employee will ever pay an effective tax contribution as high as 52%. Ever.

Yes, effective or average tax rates are not 52%.

But marginal tax rates on extra income are 52% from 32,800 onwards for single people.

MTR are what stick in people's minds, and may (do?) influence their behaviour.

Pharaoh1

Geuze wrote: »

Yes, effective or average tax rates are not 52%.

But marginal tax rates on extra income are 52% from 32,800 onwards for single people.

MTR are what stick in people's minds, and may (do?) influence their behaviour.

Similarly many of the older generation will constantly remind us of the time in the 70's and 80's "when we paid sixty pence in the pound" as if sixty pence of every pound they earned went to the tax man.
Many genuinely believe that they did and refuse to be reminded of Tax Free allowance (TFA) which was replaced by the tax credit system.
I do agree that it was a penally high rate at the time.

Sheldons Brain

Firstly, there is no reason in this day and age why the tax system has to have these bands with big steps, an alternative which sees your marginal rate gradually increase should be used. Nowadays people could easily calculate their tax on a smartphone app even if the calculations are more complex.

Secondly, as noted above, low earners may have some savage marginal rates as benefits are withdrawn. These should be modelled and refined, and if this means something more complex see app, above.

Godge

Idbatterim wrote: »

I just did a quick calculation on 80k sterling v the euro equivalen gross pay, take home pay is E57189 in Ireland and E64350 in Uk.

Earn £80,000 in 2013/2014 and you'll take home £53,363. This means £4,447 in your pocket a month.


Over the year you'll pay £21,822 income tax and £4,815 in National Insurance.

http://www.moneysavingexpert.com/tax-calculator/

Calculated Results
2014 2013
Total Income €96,500.00 €96,500.00
Your Income €96,500.00 €96,500.00
Loan BIK €0.00 €0.00
Vehicle BIK (1) €0.00 €0.00
Health Insurance BIK €0.00 €0.00
Qualifying Pension Deduction (€0.00) (€0.00)
Carer Allowance (€0.00) (€0.00)
Tax @ Lower Rate (20 %) €6,560.00 (20 %) €6,560.00
Tax @ Higher Rate (41 %) €26,117.00 (41 %) €26,117.00
Tax Credits (€3,300.00) (€3,300.00)
Net Tax (€29,377.00) (€29,377.00)
PRSI (€3,860.00) (€3,860.00)
Universal Social Charge (€6,074.00) (€6,074.00)
Annual Net Income €57,189.00 €57,189.00
Monthly Net Income €4,766.00 €4,766.00
Weekly Net Income €1,100.00 €1,100.00

The difference between us and the UK is that we tax high earners more as shown in your example.

If you were to take an example of a person earning €20k, you will find that their take-home pay in Ireland is much higher than in the UK. However, we have to keep it that way because of the higher rates of social welfare in Ireland.

Essentially, higher earners - those above 35k in Ireland - pay more tax so that lower earners - those under 30k - pay less tax and so that social welfare recipients can get better benefits. The problem created is that the incentive to work is lowered.

Idbatterim

Essentially, higher earners - those above 35k in Ireland - pay more tax so that lower earners - those under 30k - pay less tax and so that social welfare recipients can get better benefits. The problem created is that the incentive to work is lowered.

Exactly I agree. My opinion is, that the "high earners" are bled dry to keep the rest of society here with a standard of living well above what you would get in other OECD countries...

jester77

Idbatterim wrote: »

Exactly I agree. My opinion is, that the "high earners" are bled dry to keep the rest of society here with a standard of living well above what you would get in other OECD countries...

Someone on 35k in Ireland is not being bled too dry in comparison to other countries. Germany was mentioned earlier, so to compare:

Taxable Income
€2,916.67

Tax
€346.83 v 497,50 €

Social
(€147.40 + €116.67) v 595,74 €

Take Home
€2,305.77 v 1.823,42 €

Godge

jester77 wrote: »

Someone on 35k in Ireland is not being bled too dry in comparison to other countries. Germany was mentioned earlier, so to compare:

Taxable Income
€2,916.67

Tax
€346.83 v 497,50 €

Social
(€147.40 + €116.67) v 595,74 €

Take Home
€2,305.77 v 1.823,42 €

Look at the difference at levels below that. Income tax kicks in early in most countries because it is a way to show that we are all citizens and that we all contribute as well as receive.

Ireland is different and has created a receiving culture.

Idbatterim

Someone on 35k in Ireland is not being bled too dry in comparison to other countries. Germany was mentioned earlier, so to compare:

No not on 35k they are not, I'm talking on those of say 60-80k... I'd like to know, often people on this type of money would start work from a young age and may not stop until they reach retirement age, i.e. they are contributing vast sums to the exchequer, I want to know what they get out of it, as opposed to someone who is on say minimum wage or somebody who has never worked at all... Obviously some will pay far more in than they ever get out, but I believe that if they are made redundant or when they retire, their unemployment benefit or pension should be based on what they have paid in...

Look at the difference at levels below that. Income tax kicks in early in most countries because it is a way to show that we are all citizens and that we all contribute as well as receive.

Ireland is different and has created a receiving culture.

Absolutely, I agree. My dad is German, so maybe thats why I have a problem with the system here, when I'm comparing the Irish and the German one!