# It’s Time for a Personal Taxes Campaign



## Gordon Gekko (9 Dec 2017)

Ireland is a ridiculously high-tax jurisdiction, unless you’re a corporate. Yet nobody really speaks about it because of the lurch to the left politically. It’s time for people to start raising it with politicians as a key issue.

- The disparity between self-employed (55%) and employed (52%) is crazy
- Being a minority partner with the government in terms of any bonus or additional income (i.e. 45%/48% vs 55%/52%) is crazy
- The €1,270 CGT exemption is crazy (£11,300 in the UK)
- Branding people on €70k plus “high earners” is crazy
- Taxing deceased foreigners on their worldwide assets once they’ve been here 5 years is crazy
- Chargeable Excess Tax on pensions >€2m is crazy in the current low interest rate environment
- 41% tax on many investments is crazy
- Restricting interest deductions on rental properties is crazy
- Pitching Entrepreneur Relief at €1m when it’s £10m 90 minutes up the road is crazy
- The pension levy was crazy
- The rates of CGT and CAT (33%) are crazy
- The CAT thresholds are crazy

More people should highlight these issues, otherwise nothing will ever happen


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## Brendan Burgess (9 Dec 2017)

Gordon Gekko said:


> - The disparity between self-employed (55%) and employed (52%) is crazy



Agree fully.  The self-employed should pay the full 14.75% PRSI required to pay for their pensions which is paid on behalf of the PAYE earners.

Brendan


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## Sarenco (9 Dec 2017)

Brendan

I'm amazed that you are continuing to repeat this untruth every time the word "self-employed" is mentioned.

It is simply untrue that 14.75% of any employee's income is paid to State to fund their pension.

You can certainly argue that the balance between employer PRSI contributions, on the one hand, and employee/self-employed PRSI contributions, on the other, should be changed but that's a different argument.

In any event, that has absolutely nothing to do with the 5% USC surcharge imposed on the sef-employed, which is completely unjustifiable.


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## dub_nerd (9 Dec 2017)

Time to start an Irish Taxpayer's Alliance?

http://www.taxpayersalliance.com/


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## Brendan Burgess (9 Dec 2017)

Sarenco said:


> It is simply untrue that 14.75% of any employee's income is paid to State to fund their pension.



It goes into the social insurance fund, most of which is spent on the contributory pension. 

I would be happy to see complete equality between the self-employed and the PAYE sector. Both should have 14.75% PRSI contributed on their behalf. Then charge them the same USC and give them the same benefits. 

The simplest of all would be to do as I have proposed and set up a personalised account for everyone and put the PRSI into that and pay out dole and pension and sick pay based on what is in the fund. 

But it's really annoying to hear the self-employed claiming that they are getting a bad deal, when they are getting a great deal. 



Brendan


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## Gordon Gekko (9 Dec 2017)

I don’t think it’s valid to compare the two (and I’m not self-employed).

10.75% Employer PRSI should not arise in respect of self-employed people.


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## Brendan Burgess (9 Dec 2017)

Hi Gordon

The cost of providing the benefits should be linked to the benefits provided.

There is no way that a PRSI rate of 4% on self-employed pays for a pension for life. 

There is no reason to distinguish between the employed and the self-employed, either in terms of contributions or benefits. 

Brendan


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## Gordon Gekko (9 Dec 2017)

I’m not convinced Brendan. The people most affected by the 55% rate tend to be high-earning professionals whose 4% is enough to pay their pension and a few other people’s too. But I agree with your point that benefits and contributions should be linked. The Partner on €1m a year should get more than €12k a year for his massive PRSI contributions.


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## Brendan Burgess (9 Dec 2017)

Gordon Gekko said:


> The Partner on €1m a year should get more than €12k a year for his massive PRSI contributions.



He pays €40k a year

An employee on "only" €275k contributes the same amount of PRSI and gets the same pension. 

Social insurance should be roughly speaking you get out what you put in allowing for some insurance element.

We should deal with inequality through the taxation system. 

Brendan


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## Gordon Gekko (9 Dec 2017)

Brendan Burgess said:


> He pays €40k a year
> 
> An employee on "only" €275k contributes the same amount of PRSI and gets the same pension.
> 
> ...



But the employee doesn’t contribute it...his/her employer does!

They’re not comparable.


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## Brendan Burgess (9 Dec 2017)

They are directly comparable. 

They are contributions to a fund which is supposed to fund the social welfare and pensions system. 

It's like saying that an employer's contributions to an employee pension scheme are not comparable to a self-employed person's contributions. 

If I am being paid €40k and my employer is contributing €4k to a pension fund, it's the equivalent of a salary of €44k.  Which is the same as a self-employed person earning €44k who puts €4k in a pension scheme. 

I acknowledge that the link between contributions in and benefits out has been lost. But it should be restored. 

Your partner on €1m should get a higher pension than a taxi driver on €30k. But an employee on €30k should get more than a taxi driver on €30k.

Brendan


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## Brendan Burgess (10 Dec 2017)

HI Gordon

To get back to your original point. I agree with it. 

But to cut  a specific  tax e.g. the 33%CGT rate, we would need to either 

raise some other tax 

cut expenditure 

borrow the money 
While I would like to see taxes cut, I do not want to do so at the expense of increasing our borrowings even further. 

Would you think that there is scope for increasing taxes elsewhere? 

What about increasing  property taxes, if that would result in a reduction in income taxes?

What about removing the CGT exemption on death?  When I die, if I have unrealised capital gains, they should be taxed as if they were a disposal. 

What about Business Relief from CAT? 

In general, Ireland is a very low tax country for the lower paid and for married couples on average incomes.  But if we increase the taxes on the lower paid, the incentive to work would be reduced as social welfare rates would be so high.

Brendan


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## Delboy (10 Dec 2017)

There's scope for actually collecting 12.5% of corporate profits...not 1% or 2% or 0.0001% as happenes in 1 well publicised case.

There's also scope for taxing those on incomes sub 20k. Right now, they are paying little to nothing in income related taxes in real terms and in comparitiv terms to other EU countries.


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## Brendan Burgess (10 Dec 2017)

Delboy said:


> There's scope for actually collecting 12.5% of corporate profits...not 1% or 2% or 0.0001% as happenes in 1 well publicised case.



Hi Delboy 

David McWilliams made the same point in the Irish Times recently. Here is the letter I sent to the editor to correct it, but they did not publish it.   Seamus Coffey writes very well on the topic here: http://economic-incentives.blogspot.ie/2017/10/effective-tax-rates-in-c-report.html

Brendan 


Sir

It’s a pity that David McWilliams’ first article for your paper on Saturday 18th and his grand solution to solve all our problems were based on a fundamental misunderstanding of how the tax system works. He has trotted out this grand solution for years: If only the US multinationals would pay us tax at 12.5% instead of 3.38% on the profits they make here, then we would have an additional €9billion a year which would solve all our problems.

Ireland is already getting a disproportionately large tax take from US multinationals in Ireland – there is no scope for tripling it overnight through some stroke of David McWilliams’ pen.

In simple terms, companies pay tax in Ireland based on the profits they make from their activities in Ireland.  Companies which are incorporated in Ireland but which make their profits in some other countries pay corporation taxes in those other countries. That is as it should be.

American companies in Ireland did not make €96 billion profits in Ireland in 2014 as McWilliams claimed. American companies incorporated in Ireland did make €96 billion profits, but only about €25 billion of that was made from their activities in Ireland and it was properly taxed in Ireland. It’s not popular to say so, but American companies pay an effective Corporation Tax rate of close to 12.5% on the profits they make from their activities in Ireland. It would be wrong to levy tax on companies incorporated in Ireland which carry out their business overseas, just as it would be wrong to levy Irish Income Tax on Irish citizens working in Saudi Arabia.

Much of the profits made by these American companies is made in countries such as Bermuda where they pay no Corporation Tax at all.  Ireland could well have a role in working with the United States and the EU to make sure that every multinational pays its fair share of corporation taxes somewhere. But that somewhere is unlikely to be Ireland.

Yours sincerely





Brendan Burgess


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## Delboy (10 Dec 2017)

If MNC's or any other company want to channel their profits through Ireland and the rules allow it, than so be it (though I feel that will change soon under pressure from our EU colleagues as a payback for their support on Brexit this past week).
But thats not the issue I was referring to but does seem to be the nub of your letter.

I am referring to the various loopholes,knowledge boxes , whatever your having yourself which allows them to pay a fraction of the 12.5% rate we brag about on their profits, be they Irish or foreign generated. 
Thats my gripe.


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## Brendan Burgess (10 Dec 2017)

Hi Delboy

Irish incorporated companies do not pay taxes on profits generated outside Ireland.

Irish citizens working in Saudi or the UK do not pay income tax on their foreign earnings. 

Do you think that they should?

Brendan


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## MrEarl (11 Dec 2017)

Brendan Burgess said:


> .....
> Would you think that there is scope for increasing taxes elsewhere?
> 
> What about increasing  property taxes, if that would result in a reduction in income taxes?
> ...




Hello Mr. Burgess,

I would be happy to see some form of tax introduced on the sale of principal private residences, above a certain threshold.

Obviously, it would need to be a reasonably high threshold to be fair to people living in the cities and Dublin in particular, so perhaps on house sales above €800k - €900k ?

I am not in favour of increasing property taxes overall, as I think they already discriminate against those living in the cities (again, particularly Dublin), unless perhaps it was an increase on particularly valuable properties.

I also think it is long past time that the government increased the tax on diesel engines (and preferably reduce the cost of petrol engines), given it has become very cleat that diesel engines are doing our environment no favours.


Now for some slightly controversial suggestions  .....

I would like to see prostitution legalised, so that the revenue generated by the industry could be taxed.  Obviously, legalising it would also result in some improvements in health and safety for all concerned.

I would further like to see anyone convicted of a crime heavily fined and then taxed at higher rates across the board, for an appropriate period (the fine and period for the higher taxes to apply, could be linked to the severity of the crime).

I would also like to see the tax incentive offered through employers to encourage people to purchase bikes discontinued.  I think it has been responsible for dramatically increasing the average cost of a bike and at this stage, anyone who was going to avail of the scheme has long since done so.


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## Delboy (11 Dec 2017)

Brendan Burgess said:


> Hi Delboy
> 
> Irish incorporated companies do not pay taxes on profits generated outside Ireland.
> 
> ...


No, they should pay taxes at the local rate. Whether there is one or not.

But MNC's or Irish firms at home should pay Corporation tax on the profits made in/channeled through this jurisdiction at the going rate of 12.5%. A very generous rate. And not at 0.0001% or thereabouts.
And if they don't want to pay 12.5% tax on the profits made abroad, then they shouldn't channel them through here. Too much unwanted attention brought to bear on us.


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## Protocol (11 Dec 2017)

Gordon Gekko said:


> Ireland is a ridiculously high-tax jurisdiction, unless you’re a corporate. Yet nobody really speaks about it because of the lurch to the left politically.



Note that the overall level of taxation in Ireland is not high.  It is low-to-middling.

I will reply later with all the data, but note that there is no debate here: *the overall level of taxation is not high.*

Now, there are many problems with the tax system, and your list is a good list of them.


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## Protocol (11 Dec 2017)

*How to measure the overall level of taxation*

2016 taxes and social conts = 64,887m

The tax to income ratio is complicated by the choice of denominator.

Tax to GDP will be low in Ireland, as our GDP is inflated by MNC activities.

2016 GDP = 275,567m

*So tax to GDP is approx 24%, this is obviously very low compared to other countries.




*


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## Protocol (11 Dec 2017)

So instead maybe we should use GNP as the denominator,

GNP = 226,749m

So the tax to GNP ratio is 28.6%, that is still low, well below the EU average of 40% approx.


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## Protocol (11 Dec 2017)

GNP is also affected by MNC activities, so maybe we could use GNI*, the newly-developed indicator of the domestic economy.

GNI* = modified Gross National Income

2016 GNI* = 189,163m

So tax to GNI* is 34.3%.

This brings us closer to the EU average of 40% to GDP.

But still, even using this denominator, *our overall level of taxes is still below average.*


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## Gordon Gekko (11 Dec 2017)

Because people on lower incomes don’t pay enough tax.

The burden is too focussed on a small group of productive people.


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## Sarenco (11 Dec 2017)

Brendan Burgess said:


> It goes into the social insurance fund, most of which is spent on the contributory pension.


Again, not true.

Roughly one-third of the expenditure from the social fund last year related to benefits other than contributory pensions and this was closer to one-half of expenditure back in 2009/2010/2011.

The self-employed, quite correctly, have no entitlement to many of these benefits.  How could the self-employed receive a benefit for the loss of employment?

You seem to be arguing for the abolition of employers' PRSI and the imposition of a flat rate of PRSI @14.5% on all income, from whatever source.  I really can't see how that would be fair or equitable.


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## Brendan Burgess (11 Dec 2017)

Hi Sarenco 

Not sure what "mistruths" I am pushing here. It seems that we are in violent agreement on the figures at least.






If one third went on benefits other than the contributory pension, then surely 2/3rds i.e. most went on the contributory pension? 

I am arguing that people should get out what they put in, after some allowance for an insurance element. 

A self-employed person declaring €20,000 a year and paying €800 PRSI a year should not get the same pension entitlement as someone on whose behalf €2,950 was contributed. 

Brendan


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## T McGibney (11 Dec 2017)

Brendan Burgess said:


> A self-employed person declaring....



Hi Brendan 

Why do you continually and totally gratuitously infer tax evasion on the part of the self-employed?


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## Sarenco (11 Dec 2017)

Hi Brendan

While it varies from year to year, it is not generally true that most employer/employee PRSI contributions go to meet contributory pension payments - in general roughly half of such contributions go to meet working age benefits.

You also seem to be ignoring the fact that many self-employed folk make substantial PRSI contributions on behalf of their employees.  I assume you are not arguing that the contributor (employer) in that case should "get out what they put in".

Again, I have no problem with an appropriate rebalancing of employer contributions on the one hand and employee/self-employed contributions on the other, with consistent minimum contribution levels and ceilings in both cases.


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## Brendan Burgess (11 Dec 2017)

Sarenco said:


> You also seem to be ignoring the fact that many self-employed folk make substantial PRSI contributions on behalf of their employees. I assume you are not arguing that the contributor (employer) in that case should "get out what they put in".



Hi Sarenco

Are you suggesting that if an employer contributes 10% to a pension fund on behalf of his employee, the employer should benefit in some way? 

The employer pays PRSI on behalf of the employee just as many employers pay pension contributions on their behalf.

Brendan


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## Brendan Burgess (11 Dec 2017)

T McGibney said:


> Why do you continually and totally gratuitously infer tax evasion on the part of the self-employed?



Hi Tommy

As  I have said in this thread:

*What is the extent of tax evasion these days?*

While many self-employed are tax compliant,  many self-employed, especially in cash businesses, are not.

Brendan


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## Sarenco (11 Dec 2017)

Brendan Burgess said:


> Are you suggesting that if an employer contributes 10% to a pension fund on behalf of his employee, the employer should benefit in some way?


No, I'm just pointing out the difficulty with your proposal that contributors should "get out what they put in" to the fund.


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## DublinD (11 Dec 2017)

Taxes like CAT don't tend to grab the normal man's attention as usually only hits when they inherit  - so seen as a pain but what else can people do! Low hanging fruit for government to grab. Interesting rates/bands didn't move in the budget..they'll be slow to move back up (even more so the bands when calculated in real terms to previous years)

Wonder if low CGT exemption limits puts people off shares (i.e. too low a trigger value to be worth the hassle of a complicated tax return)?

DIRT not a trendy issue currently as interest rates are low - again easy to ignore for the normal person in current climate.


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## Gordon Gekko (12 Dec 2017)

Paschal Donohue would be considered far more left wing than Michael Noonan, which is a shame.


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## keane2097 (12 Dec 2017)

What was the bit about taxing deceased foreigners in reference to?


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## MrEarl (13 Dec 2017)

Gordon Gekko said:


> Paschal Donohue would be considered far more left wing than Michael Noonan, which is a shame.



...but probably a good choice if you want to try and stay on side with some of the moderate lefties, in the hope of getting back into power after the next election etc.

A slightly more "right wing" Minister would be better to deal with the finances, as I think they'd be more likely to grab the bull by the horns on occasion.

Paschal is little more than the Ned Flanders character of the current Government imho ...highly unlikely to upset or offend anyone.


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## Gordon Gekko (13 Dec 2017)

keane2097 said:


> What was the bit about taxing deceased foreigners in reference to?



If a foreigner spends 5 full years here and then dies, his/her worldwide assets are caught for CAT.


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## keane2097 (15 Dec 2017)

Gordon Gekko said:


> If a foreigner spends 5 full years here and then dies, his/her worldwide assets are caught for CAT.



Ah, ok - thanks!


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## BreadKettle (16 Dec 2017)

At 33% and a mere €1,270 exemption would I be right in saying Ireland has the second highest CGT in the world?


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## Taxpert (29 Dec 2017)

At the risk of broadening this debate, I have a particular bugbear about the differing treatment of younger v older people in the tax system. If you take  couple, both 66 years, and each has a state pension (€12.5k), each has an occupational pension of 20k and each has a parttime job of 17.5k. Total household income = €100k.

Total state deductions = €21k approx

By contrast a couple aged 35 , each earning €50k, have total state deductions of €27k.

Surely our system should assist those in greater need - mortgage, childcare, commuting etc?


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## Protocol (29 Dec 2017)

Taxpert said:


> At the risk of broadening this debate, I have a particular bugbear about the differing treatment of younger v older people in the tax system. If you take  couple, both 66 years, and each has a state pension (€12.5k), each has an occupational pension of 20k and each has a parttime job of 17.5k. Total household income = €100k.
> 
> Total state deductions = €21k approx



Are you sure this 21% ATR is correct?

But yes, the elderly are undertaxed.

 [broken link removed]


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## Taxpert (29 Dec 2017)

I presume you're referring to the 21k?

I think it's right.

Tax   €19010
Prsi.   0
USC. €2,000 (est).


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## Protocol (29 Dec 2017)

Average Tax Rate

100k in 2017

67,600 * 0.20 = 13,520
32,400 * 0.40 = 12,960

26,480 less tax credits 1650+1650+1650+1650+490 = 19,390 tax

USC = 

PRSI =


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## Brendan Burgess (29 Dec 2017)

Taxpert said:


> At the risk of broadening this debate, I have a particular bugbear about the differing treatment of younger v older people in the tax system.



I agree that the debate needs to be broadened. 

It's not just enough to say "Cut taxes" 

Single people without children pay average to high taxes.

Married couples on  average incomes with children pay almost no taxes when you factor in the negative taxes of child benefits.

The Average Tax Rates look at just this year. It ignores the fact that most people will be getting a lot of the PRSI back in pension and unemployment benefits in later years. 

Brendan


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## Taxpert (29 Dec 2017)

The €6k (approx) differential between young and old is made up of (round numbers)

Tax - -€500

PRSI.  - €4000 (no PRSI payable by over 66s)

USC  - €1500. ( no USC payable on 25k of income as it is state oap).

I can (sort of) understand the difference in PRSI. But if it's earned income I'd question it.

I see no justification whatever for a €500 tax credit for 65+.

While I can understand the no USC on the state pension I don't agree with it.


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