Top earners got almost €300m in tax breaks
THE GOVERNMENT gave a “pot of gold” of almost €300 million to over 400 of the highest earners in 2007 through tax shelters, according to Labour’s finance spokeswoman.
Joan Burton said Revenue Commissioners figures highlighted the “extravagance” of tax relief schemes introduced by the Government.
The figures, contained in a document posted on the Department of Finance website, show that 439 individuals who earned over €250,000 claimed €288 million in 2007 under 54 tax reliefs and exemptions.
These ranged from artists exemptions; urban and rural renewal schemes; stallion fees; patent income; and capital write-downs on hotels, nursing homes, hospitals and sports injury clinics.
The average claimed per individual was €650,000. With only 78 individuals earning over €1 million, this suggests that there were substantial claims from the highest earners.
Ms Burton said last night she would be pressing for the all-party Oireachtas committee on finance to prioritise discussion of the document, entitled Analysis of High Income Indvididuals’ Restriction 2007, when it met at the end of this month.
“This was a pot of gold. The Government was extraordinarily generous to the highest earners with tax breaks and shelters, many of them relating to the property sector,” said Ms Burton.
The breakdown of the figures shows that the tax reliefs for capital write-downs of hotel investments was the single biggest relief claimed in 2007.
Some 40 individuals earning €250,000 or more claimed a total of over €52 million.
Other exemptions which saw large claims for relief were dividends and distribution from exempt patent income (41 people claimed €45 million); set-off and carry forward of capital allowances in rental situations (109 people claimed €38 million); and the artists’ exemption (40 individuals claimed a total of €24.5 million).
The use of exemptions and reliefs, many of them introduced by Fianna Fail-led governments since 1997, has long been the subject of political controversy. Studies by the Revenue Commissioners in successive years showed that a significant number of the country’s highest 400 earners had used the reliefs to minimise their tax payments to below 10 per cent of the income.
The 2006 and 2007 Finance Act introduced measures which were designed to ensure that all those with an income over €500,00 would pay an effective rate of 20 per cent in tax.
The department analysis shows that the 214 high-income individuals with an income of €500,000 or more who availed of tax reliefs paid an average effective tax rate of 20.8 per cent in 2007.
As a result of the measures, the Exchequer received an additional €34 million in revenue, representing a 129 per cent increase on the tax paid by this cohort.
Some 20 of these people would not have paid any tax at all in 2007 if the new restrictions had not been introduced. The majority of these would have been artists, writers or composers.
For a further 225 people with incomes of between €250,000 and €500,000, the increases in tax-take was tiered up to 20 per cent as the income increased. Their effective tax rate almost doubled from 7.2 per cent of income to 13.6 per cent, resulting in an additional €5.8 million in revenue for the Exchequer.
Some of the property reliefs have been, or are in the process of being, phased out.
Ms Burton said the sheer scale of the tax foregone for such a small number of individuals was staggering. She added it strengthened the case for a quick abolition of all such shelters.