Many of Ireland's wealthiest taxed at rate below average worker

About 90 of the wealthiest people in the country pay income tax at a lower rate than the average taxpayer, according to a new report from the Comptroller & Auditor General (C&AG).

And 83 of these so-called high net worth individuals, or one in four of the total, declared taxable income of less than the average industrial wage, which is just over €36,500.

The report shows many of Ireland’s very highest earners pay relatively small amounts in income tax, with many using tax credits and reliefs to cut their bills.

The study by the C&AG, in the latest annual report, covered the Revenue’s taxation of more than 300 of the country’s richest people in 2015. Revenue defines high net worth individuals as those with more than €50 million in assets and the C&AG report shows a huge variation in the income tax paid by the 334 people who fell within this group.

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The Revenue has accepted a recommendation from the C&AG to consider changing the €50 million benchmark, which is high by international levels and looks set to step up anti-avoidance activity with the establishment of a special unit to oversee these personal taxpayers.

Paid relatively little

While on average this group of wealthy people pay tax at a rate of between 30 and 40 per cent on their incomes, a significant minority pay a lot less, with 90 paying an effective tax rate less than the average income taxpayer in 2015.

Just 10 taxpayers from the group were responsible for 85 per cent of the €473 million income tax bill owed in total, meaning that many of the rest paid relatively little. Some declared little income for tax here, presumably due to tax residency elsewhere, while other successfully used a range of credits and reliefs to shelter income from tax.

The C&AG report, which otherwise highlights a litany of waste in Government departments, said 140 high net worth individuals, or 42 per cent of the total, declared taxable income of less than €125,000 in 2015.

Many used tax reliefs including capital allowances, write-offs related to business investment. Some ended up in disputes with Revenue over their use of avoidance schemes, in one case resulting in a €10 million payment.

Very highest earners

A spokesman for the Department of Finance said the Irish tax system was widely regarded internationally as highly progressive, with the better-off paying more. However the report shows that measures introduced by the State to increase the tax take from the very highest earners are having a limited impact. There were just seven returns in 2015 for the domicile levy introduced in 2010 to get a contribution of €200,000 from wealthy individuals, who would otherwise pay little income tax here.

The C&AG also highlighted the ongoing losses to the exchequer from tax rules which allow companies to carry forward losses – most made during the crash – to write off against their tax bills. In 2016 a total of €231 billion in losses and unused allowances were available for offset, meaning €29 billion in possible future reduced corporation tax payments in the years ahead. Some €16 billion was claimed against tax in 2016.

The C&AG says this means the banking sector,which holds almost €120 billion of the tax losses, not paying any tax on profits for another 12 years.