Income Tax in Ireland

JD_PN17

The tax system in Ireland is long overdue a radical overhaul. Enough with the promised abolition of USC and now the possible merging of it with PRSI since Varadkar has been elected FG leader. There needs to be serious discussion about a straightforward and fair system which everyone pays towards and doesn't end up leaving a small section of society for paying for everything. I'm not advocating on letting the rich off with huge tax cuts and unfairly penalising the poor.

I'd propose doing away with the current tax system in it's current form entirely and starting from scratch. I'd completely do away with tax credits in their entirety, they complicate the system in my opinion and aren't fit for purpose. I'd propose putting in place one form of taxed charged on gross income, with each individual treated as a single tax unit doing away with the ability to lump a married/cohabiting couple as a single tax unit (no more tax benefits to marriage)

There'd be a simple four band system which is fair to all individuals. It'd be as follows;
~10% charged on the first €25,000
~30% charged on the next €25,000
~40% charged on the next €50,000
~50% charged on remaining income over €100,000

This is fair as nobody will pay more than .50c on each €1 earned. It also reduces the effective tax rate to below 50% and still ensures those who can pay more do, whilst introducing the lower paid into the tax system.

I've calculated with current projected figures that there will be c. 3.2 million individual tax units in Ireland in 2018 and under my proposal they would bring in c. €23.3 billion to revenue.

na1

With this system you'd have to make redundant many payroll people, not talking about revenue staff
Who would pay them the redundancy?)

Stheno

JD_PN17 wrote: »

I've calculated with current projected figures that there will be c. 3.2 million individual tax units in Ireland in 2018 and under my proposal they would bring in c. €23.3 billion to revenue.

Have you got a breakdown of your analysis?

Am I imagining things of did you have the same thread in the old cafe a few weeks ago?

Cookie_Monster

Stheno wrote: »

Am I imagining things of did you have the same thread in the old cafe a few weeks ago?

It sounds similar but slightly different.

anyway I don't believe the above go far enough. Ireland is still far too high a taxation country. Rather than constantly looking for any changes to remain cost neutral the expenditure side needs to be address as part of any tax reform.

On a very casual comparison basis, here in NZ income is taxed as follows:
From To Rate Euro Equiv
$- $14,000 10.5% € 9,000
$14,001 $48,000 17.5% € 30,800
$48,001 $70,000 30.0% € 45,000
$70,000+ 33.0%


Along with VAT being only 15% (on everything though)

Both of these are considered too high and moves have been made this year to increase bands and lower income tax burdens.
Australia is similar enough too but bands are bigger again, you have to earn over $180AUS to be on the top rate of 45%!

Geuze

Cookie_Monster wrote: »

Ireland is still far too high a taxation country.

Ireland is a low-to-middle tax country, all the data backs this up.

What is true is that the top MTR at 50% approx starts at a very low point, approx 32-34k. That is why people perceive Ireland as a high tax country, even though it isn't.

My parents earn 48k approx, and pay under 10% direct income taxes. This is very low compared to other countries.

A large amount of earners in Ireland pay zero direct taxes.

laugh

Leo the clown wants to reduce tax already with Brexit coming down the tracks, more social housing needed and our public services needing improvement.

Peregrinus

Cookie_Monster wrote: »

It sounds similar but slightly different.

anyway I don't believe the above go far enough. Ireland is still far too high a taxation country. Rather than constantly looking for any changes to remain cost neutral the expenditure side needs to be address as part of any tax reform.

On a very casual comparison basis, here in NZ income is taxed as follows:
From To Rate Euro Equiv
$- $14,000 10.5% € 9,000
$14,001 $48,000 17.5% € 30,800
$48,001 $70,000 30.0% € 45,000
$70,000+ 33.0%


Along with VAT being only 15% (on everything though)

Both of these are considered too high and moves have been made this year to increase bands and lower income tax burdens.
Australia is similar enough too but bands are bigger again, you have to earn over $180AUS to be on the top rate of 45%!

But taxes in New Zealand are, overall, a much higher burden than in Ireland. New Zealand taxes total 34.5% of GDP; Irish taxes total only 30.8%. So, if New Zealand income tax is lower, they more than make up for that with high taxes in other areas, e.g. property taxes, corporate taxes.

It may (or may not) be that the balance struck by New Zealand (or any other country) between income tax and other revenue sources is preferable to the one we strike. But I don't think it makes sense to point to another country's income tax laws and say "we should do something like that" without also addressing the corollary; we also have to consider the kind of things they do to make up revenue from other sources, and we have to address the social and economic policy implications of doing those things.

Pkiernan

laugh wrote: »

Leo the clown wants to reduce tax already with Brexit coming down the tracks, more social housing needed and our public services needing improvement.

Yeah..cos what the country really needs to do is tax workers more so layabouts can have more free stuff.

Idbatterim

http://www.independent.ie/business/irish/tax-cuts-for-hardworking-families-will-trump-social-welfare-hikes-varadkar-35876680.html

Tax cuts for hard-working families will trump social welfare increases in next year's budget, Taoiseach Leo Varadkar has indicated.
The Taoiseach is "determined" to find money for tax cuts in the next budget but is "not sure" if it will be possible to increase weekly payments for people with disabilities and carers.

why should there be welfare increases? to worldclass welfare rates. Maybe they have finally found some backbone. This bull**** of "shure we are all in this together, a great bunch of lads. Heres a few euro everyone" Get stuffed. Welfare should be frozen for years, its payback time for the workers, not the work shy.

Id be up for total welfare reform, but politically it probably wont be touched. So freeze it for years, I proposed this many times on boards...

Jack up property tax too. Taking more out of the tax net is idiotic. They should do something about the cost of living. Taxing income at outrageous rates from an extremely low level, is idiotic to the extreme!

Marcusm

Peregrinus wrote: »

But taxes in New Zealand are, overall, a much higher burden than in Ireland. New Zealand taxes total 34.5% of GDP; Irish taxes total only 30.8%. So, if New Zealand income tax is lower, they more than make up for that with high taxes in other areas, e.g. property taxes, corporate taxes.

It may (or may not) be that the balance struck by New Zealand (or any other country) between income tax and other revenue sources is preferable to the one we strike. But I don't think it makes sense to point to another country's income tax laws and say "we should do something like that" without also addressing the corollary; we also have to consider the kind of things they do to make up revenue from other sources, and we have to address the social and economic policy implications of doing those things.

Irish GDP is not a meaningful measure; take for example, the debt/GDP ratio which is now dramatically reducing. We still have the world's second highest indebtedness per capita in the world. That's not sustainable as we do not have a meaningful basis to tax much of "our" GDP.

Jawgap

Geuze wrote: »

Ireland is a low-to-middle tax country, all the data backs this up.

What is true is that the top MTR at 50% approx starts at a very low point, approx 32-34k. That is why people perceive Ireland as a high tax country, even though it isn't.

My parents earn 48k approx, and pay under 10% direct income taxes. This is very low compared to other countries.

A large amount of earners in Ireland pay zero direct taxes.

Sorry, but this just isn't true.

I'm in a PAYE position but I also do external work so have to submit a self-assessed return. Meaning I have paid most of my tax for the previous year before I calculate what's due on the extra income......

......I've just done my assessment for 2016 and - again - I find myself handing over 54% of what I earned to the government. If there's no incentive to go out and earn that extra Euro then the tax in the country is too high, imo.

.....and before anyone asks, this is contract work I committed to before realising how much it costs in tax......it's certainly not something I'll be perpetuating once the current contracts expire.

wordofwarning

Geuze wrote: »

Ireland is a low-to-middle tax country, all the data backs this up.

That is why people perceive Ireland as a high tax country, even though it isn't.

My parents earn 48k approx, and pay under 10% direct income taxes. This is very low compared to other countries.

A large amount of earners in Ireland pay zero direct taxes.

Ireland is a low tax country, if you are a low to median income earner. We have a highly progressive tax system. The people at the top pay most of the tax in the country. The top 10% pay around 70% of the income tax in Ireland

Capital Gains Tax in Ireland is among the highest in the developed world with a very low yearly allowance. We have very low threshold for inheritance (one of the lowest in the world)

Most people perceiver Ireland to be low tax country, as they are not paying tax. Go to Ballsbridge, Clontarf, Malahide etc and ask the residents what it is like to live in a low tax country. I think you know what the response will be...

Royale with Cheese

Jawgap wrote: »

Sorry, but this just isn't true.

I'm in a PAYE position but I also do external work so have to submit a self-assessed return. Meaning I have paid most of my tax for the previous year before I calculate what's due on the extra income......

......I've just done my assessment for 2016 and - again - I find myself handing over 54% of what I earned to the government. If there's no incentive to go out and earn that extra Euro then the tax in the country is too high, imo.

.....and before anyone asks, this is contract work I committed to before realising how much it costs in tax......it's certainly not something I'll be perpetuating once the current contracts expire.

You've low incentive to do extra work at the high end, with every extra euro you earn being taxed at 52%. You've low incentive to go out and work at the low end, with low paying jobs leaving you barely better off than being on welfare in a lot of situations. That right there is a total clusterfúck.

Idbatterim

I just read a article highlighting the shambolic tax system here. Good article, can't find link now though. There should be no more USC cuts or workers taken out of tax net. The issue isn't in that end. They want to raise the threshold at which you pay the outrageous rate. That missing the point. Taxing income a tax the rate of 51% is the major issue! I think it should be around 35% or so. From maybe 35-70k or thereabouts. Significant, but not enough to do stop people taking hours, extra work etc. I think any rate over 45% is taoimgbthe absolute piss regardless of income

Hollister11

Honestly, as someone else said in the thread. There should be no social welfare increases in this country.

If I remember correctly the figure spent on social welfare is €20B each year. Thats insane. It's entirely feasible to slash that by 20%. That could be redirected to tax decreases.

Another advantage is that people who suddenly need money, will actually work for it now, and contribute back to the tax base. So less payouts, and more revenue for the government.

There's a man who is 40 living on the road she grew up on. He was never worked a day in his life, he has received the dole since he left school at 17. He has inherited' his parents council house where he pays feck all rent. This is a 3 bed semi in a nice part of Dublin for a single man. There's families that need this.

He has spent the last 5 years doing his junior, leaving cert, and mickey mouse course just so he can keep his benefits.

Hollister11

Idbatterim wrote: »

I just read a article highlighting the shambolic tax system here. Good article, can't find link now though. There should be no more USC cuts or workers taken out of tax net. The issue isn't in that end. They want to raise the threshold at which you pay the outrageous rate. That missing the point. Taxing income a tax the rate of 51% is the major issue! I think it should be around 35% or so. From maybe 35-70k or thereabouts. Significant, but not enough to do stop people taking hours, extra work etc. I think any rate over 45% is taoimgbthe absolute piss regardless of income

A max of 35% would be fair game.

You always get people saying "The rich should pay more". The fact is they do, alot more, it's just at the same rate as you.

Idbatterim

Yeah. See the issue with ridiculous welfare rates and outrageous rates of tax on low income i.e. 34k creates a multitude of problems. I believe the welfare bill is 23 billion!!! I'd take an extra to it. But for political reasons that won't happen. But not raising rates isn't that contentious and should be done. I think people being squeezed more and more here are finally running out of patience. Good!

Idbatterim

http://www.newstalk.com/The-case-for-raising-the-income-tax-threshold

Yourself isit

Hollister11 wrote: »

A max of 35% would be fair game.

You always get people saying "The rich should pay more". The fact is they do, alot more, it's just at the same rate as you.

The actual rich often pay a lot less. Income tax is really a wage tax.

MayoSalmon

Yourself isit wrote:

The actual rich often pay a lot less. Income tax is really a wage tax.

Firstly define your definition of "rich" and explain how they in any way pay less tax than the majority of Irish citizens.

TheDoc

Many independent assessments label Ireland as having one of the most progressive systems in the OECD.

37% of our workforce is exempt from income tax.
A small portion of high income tax payers, account for over 55% of our income tax revenue.
The rest is made up by the middle.

So those on low incomes pay nothing or little to nothing. As you move up you pay more, and at the top you pay the most.

It's subjectively twisted by politics and opinion, but assessments are pretty clear on our tax system. Just like during the recession how politicians of a certain demographic would paint how the lower income earners were carrying the country through, well no, they weren't. The high income tax payers and upper part of the middle carried the country through the recession when it comes to income tax take.

I always refer back to this, and how it caused so many politcians, groups, lobbyist groups etc. to just lose their **** because it went against the narrative that it was X being hit hardest by austerity or the recession

http://www.ibec.ie/IBEC/Press/PressPublicationsdoclib3.nsf/vPages/Newsroom~new-ibec-report-debunking-irish-income-tax-myths-29-09-2014/$file/Debunking+Irish+income+tax+myths.pdf

Other assestments, some independant some not, all point to the same things. The system at a core is very progressive and suitable, but the short term Government attachments and promise givings have made it a bit bloated, convaluted, and have put fat on what was and still is a pretty decent system.

What really is required is a bit of trimming, and a long term strategy, not jumping from government to government to buy votes, which in fairness, is here for the long haul most likely.

Idbatterim

37% of our workforce is exempt from income tax.
A small portion of high income tax payers, account for over 55% of our income tax revenue.
The rest is made up by the middle.

there are big issues with having so many contribute so little and annihilating lowish to mid income earners with a 51% rate. Its such an outrageous rate as so low a figure, that I reckon economically it does a lot of damage to job creation, hours turned down, promotions not taken, extra hours worked, taken as time in lieu instead of overtime. People you actually want to stay in the country leaving or those who have valuable skills not returning home..

the problem is due to politics, it will never be sorted out properly. But this might be a middle ground, simply cut the marginal rate, even if 1% a year over the next 5 years. And yeah so what if it doesn't benefit low low income workers, even if it benefits low income workers on a portion of their salary from 34k+, great! which is what E34k is, or the higher earners, they are they ones being bled dry. They should be first in line for tax cuts. Of course when you have say 1 high earner, (say 100,000k plus) for every "high earner" there are 99 more votes to be won by taking out more of those people from the tax net that contribute virtually nothing. Increased propery taxes, when the review is carried out in 2019, should be used to lower marginal rate, invest in infrastructure and pay down debt...

Beta Ray Bill

JD_PN17 wrote: »

The tax system in Ireland is long overdue a radical overhaul. Enough with the promised abolition of USC and now the possible merging of it with PRSI since Varadkar has been elected FG leader.

Just to add

FG has back peddled on the most hated of all taxes USC.

It's going to be merged with PRSI...

Geuze wrote: »

Ireland is a low-to-middle tax country, all the data backs this up.

I'm in complete disagreement with you, we are very heavily taxed in this country, especially if you are a PAYE worker.
It's the "Stealth" taxes, which make our taxation level so high.
I define a "Tax" as Charge I have no choice on paying where the money goes to the state , a semi state body or a body nominated by the state.

So when you include:
Income Tax
VAT
USC
PRSI
VRT
Capital Gains Tax
DIRT
Household Charge
Motor Tax -- A Car is a necessity for me,
Heavy duty on items like Fuel
Levies on Insurance
Bin and Water charges (These should really be covered by the housing charge I'm now paying)
Tolls on Motorways (These should really be covered by Motor Tax)
Health Insurance Tax/Levy I'll have to pay if I ever go without health insurance for a period of time.

Also in relation to that we get very little for our tax in this country.
Infrastructure Infrastructure and Services are poor.

I do agree with the OP though, the Tax system needs a huge overhaul. It is defo not fit for purpose.
I think a better plan of action though would be to investigate where the Tax is actually going?

I'd imagines a huge portion of it is going on Social Welfare.
If they could curtail that we'd all have to pay less.

Idbatterim

Household Charge
Motor Tax -- A Car is a necessity for me,
Heavy duty on items like Fuel
Levies on Insurance
Bin and Water charges

this is part of the problem, there is no serious household charge, no water charges. Other countries have both of them at reasonable levels. the world class welfare system here. 3 things that most other countries don't have. so income at mid - and in particularly higher level here, is taxed at penal and immoral rates and those citizens bent over backwards!

I do agree with the OP though, the Tax system needs a huge overhaul. It is defo not fit for purpose.
I think a better plan of action though would be to investigate where the Tax is actually going? I'd imagines a huge portion of it is going on Social Welfare.
If they could curtail that we'd all have to pay less.

I totally agree, I would radically reform it , but this is Ireland. At best you could hope for it to be frozen for years like I have long suggested. It should be literal pay back time now for certain workers! Wait for it (welfare) to be increased again this year, several hundred million more that could be used to reward the hard working, infrastructure, debt repayment!

na1

You forgot to mention FIS & child benefits: the single earner family (with a  wage around 22-25k) with 2 children pay NEGATIVE tax.
So effectively they take more than contribute.

For Reals

na1 wrote: »

You forgot to mention FIS & child benefits: the single earner family (with a  wage around 22-25k) with 2 children pay NEGATIVE tax.
So effectively they take more than contribute.

That's because the system is so poorly designed even some working people need a dig out just to make it through the week. If we tackled why there is a need in the first place it might work out great for everyone.
Like many areas of poor management of the state it's all too often answered by throwing tax money at it to 'fix' any short comings.

The announcement of a tax break for the top 11% is a good one.

Yourself isit

MayoSalmon wrote: »

Firstly define your definition of "rich" and explain how they in any way pay less tax than the majority of Irish citizens.

You can't think of somebody off hand who is a multi millionaire or a billionaire paying 0%?

If you are rich and paying 51% you have a very bad accountant.

MayoSalmon

Yourself isit wrote:

If you are rich and paying 51% you have a very bad accountant.

Yourself isit wrote:

You can't think of somebody off hand who is a multi millionaire or a billionaire paying 0%?

So multi millionaire is rich in your eyes and also because the tax code will allow them to somehow to pay under 51% that's their fault?!

Think you need to take your issue up with the government and not the capitalist

chicorytip

Geuze wrote:

A large amount of earners in Ireland pay zero direct taxes.

Yes, such as those earning the minimum wage.
Why should they be exempted from paying income tax?

Beta Ray Bill

chicorytip wrote: »

Yes, such as those earning the minimum wage.
Why should they be exempted from paying income tax?

I believe this is correct

Even if you're on min wage you should be paying tax (People on min wage are paying tax now via USC right?). IE you should be contributing.

But on the broad scale of it, if you're a low earner with a few kids or a very wealthy person, the chances are you pay very little tax relative to what you earn.

If you're a PAYE person earning anything over €45k PA, you may bring your vaseline and assume the position. Cause the tax man is going to hockey you.
The Gas thing is, that it's these people that are keeping the country afloat and they get no recognition for it.
Each time a new Tax is introduced, it's these people that are hit hardest by it.

Also from my previous post I forgot about the following Taxes:
TV Tax (TV Licence)
Inheritance Tax

Idbatterim

I watched renua tax policy video the other day, it mentions the total lack of recognition for those here picking up the tab for everything. I then read a piece by Willie O'Dea in todays irish independent, wants to hike up all forms of welfare again. FG are far from perfect, but FF need to be kept as the junior party, FG are the lesser of two evils by a long shot. I really hope Renua win a few seats...