Tax coffers in the Republic of Ireland is filling up faster thanks to the introduction of higher taxes for the wealthy.
The government picked up €80.18 million from the wealthy in 2010 after dropping tax relief for the rich, according to a report by Ireland’s Revenue Commissioners.
After transition years between 2007 and 2009 that saw tax rates and allowances change, in 2010, everyone earning more than €400,000 paid tax at 30%, while rates and thresholds stayed the same for everyone else.
Nearly 1,550 wealthy taxpayers were trapped in the tax net, bringing in the extra €80 million.
In 2009, only 452 Irish taxpayers were caught by the rules, resulting in an extra €38.86 million going to the government.
The previous years showed similar tax returns – with 423 taxpayers paying €39.68 million in 2008 and 439 paying €39.99 million the year before.
Number of wealthy paying top rate tax triples
The change in focus for the Revenue Commissioners results from a review of reliefs for the wealthy carried out in 2005.
Around 60 reliefs were available for high-earners, covering a wide range of business activities, including property, like hotels and holiday cottages to nursing homes, hospitals, sports injury clinics, multi-storey car parks and urban and rural renewal schemes.
Other reliefs included patent income exemptions and for mining.
The review revealed around 400 top earners exploited the reliefs and that many paid little or no tax.
As the country’s economy worsened as part of the eurozone debt crisis, the government reduced earnings thresholds for higher rate taxpayers to €125,000 – although the 1,500 highest earners represent only a fraction of the number caught in the tax net because few claim any reliefs.
Overall objective was achieved
“The overall objective was to ensure that, from 2007, individuals with an adjusted income of €500,000 or more where the full restriction applied would pay an effective rate of tax of approximately 20% on a combination of adjusted income and ring-fenced income,” said the report.
“Compared to 2009, the figures for 2010 represent an increase of 1,092 in the number of individuals and an increase of €41.32 million in the additional tax yield from the measure.”
Overall, Ireland’s tax revenues are ahead of forecasts.
Government figures show that tax collected by the end of July 2012 was 2.5% ahead of target.
Tax revenues raced €500 million ahead of target, to €20.3 billion.
Taxes were also €1.68 billion (9%) ahead year-on-year.
Three of the main taxes were ahead of expectations:
- Income tax was over 11% up compared with the same period last year.
- Corporation tax was €313 million (18%) ahead of target.
- VAT revenues were €58 million (4.3%) ahead of target for the year. Compared with July 2011, receipts were up 3.2% and heading for a 2.6% increase for 2012
Excise duties were below target at €40 million (1.5%) but are 0.8% higher year-on-year.
