# Any good report on how much income tax is paid by different groups?



## Brendan Burgess (30 Dec 2015)

I had a look at the Revenue Commissioners Statistical Report for 2013 and it's not easy to read or prepare a table from. 

In the past, there were tables with information such as 

The Top 10% of earners earned 30% of all income and paid 50% of all tax.
The Bottom 10% of earners earned 2% of all income and paid 0.1% of all tax. 

Sometimes this is given in answer to Dail questions, but I can't find it. 

Brendan


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## Brendan Burgess (30 Dec 2015)

OK, I have found some of it here

http://www.revenue.ie/en/about/statistics/ready-reckoner.pdf


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## Firefly (30 Dec 2015)

Hi Brendan,

Interesting table. It would be more interesting if those earning more than 275K were further broken down, say 275,000 - 500,000, 500,000 - 1,000,000 and 1,000,000+


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## odyssey06 (30 Dec 2015)

If I'm reading those figures correctly, the top 10% means that block of 240,000 "tax units" earning the most, which would put a little over half of the 75000 - 100,000 income range into it.
The small print says that a married couple can equal one tax unit. The average industrial wage is approximately €40,000 per year. So a couple where both persons are earning the average wage could be in the Top 10% of earners if they have chosen joint assessment? 
Probably they would just miss out on the "Top 10%" but they would certainly be in the same income bracket as some of that Top 10%.


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## Brendan Burgess (30 Dec 2015)

Hi Odyssey

That is correct.  

But even adjusting for this, it shows that the higher earners pay most of the tax. 

Brendan


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## Sophrosyne (30 Dec 2015)

Brendan,

I don’t think that the top 10% ever paid 50% of all taxes.


The 2011 figures showed that they had:
6.33% of gross incomes and paid 12.87% of overall income tax and USC

The 2012 figures showed that they had:
6.58% of gross incomes and paid 13.61% of overall income tax and USC


I agree with Firefly that it would be more informative if incomes in excess of €275,000 were further broken down _and also _that the income grouping for all categories was consistent.

As the figures stand, the income groups that paid the higher percentage of overall income tax and USC were:

2011 - €75,000 - €100,000 with 14.56% and
2012 - €100,000 - €150,000 with 15.28%

However, as mentioned these percentages may be distorted due to inconsistent income groupings.


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## huskerdu (30 Dec 2015)

Sophrosyne, I don't know where your 6.58% figure comes from.

Based on these stats, 283674 tax payers,  or couples, earn over €75K. This is 11% of the total number of tax payers.
The total tax paid by these tax payers is €11B which is more than 50% of the total tax take.

However, the 413,000 tax payers who earn less than 10K are distorting the figures. The average earnings in this group is 4K.
Also the total number of tax payers, at 2.4M higher than the size of the workforce, I think. Therefore, a lot of the very low paid must be students with summer or evening jobs.

If you remove them ( which is a generalisation, I know), the total number of tax payers is 2M.
Then, 8.6% of pay payers earn over 100K and they pay 46% of the tax paid.


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## Sophrosyne (30 Dec 2015)

The figure of 6.58% is taken from Revenue's income distribution tables for 2012.

Gross income charged All ranges          = €m 79,369.42
Gross income €750,000 + range           = €m 5,221.91 - (6.58% of gross income charged)

The total number of cases in the €275,000 + range is 9,700
Total number of cases in the under €10,00 range is 376,631- (2.11% of gross income charged).


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## huskerdu (30 Dec 2015)

I don't understand how this is the top 10% of tax payers.  The number of tax payers is 2.4M. The labour force is 2.1M.




Sophrosyne said:


> The figure of 6.58% is taken from Revenue's income distribution tables for 2012.
> 
> Gross income charged All ranges          = €m 79,369.42
> Gross income €750,000 + range           = €m 5,221.91 - (6.58% of gross income charged)
> ...


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## Andy836 (30 Dec 2015)

The top 10% of income earning units paid 56% of income tax & USC according to the 2016 budget ready reckoner.

Including 69% of the €75k to €100k units. 
The top 2.2% paid 29% of total income tax & USC.


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## Sophrosyne (30 Dec 2015)

Just to clarify, rather than the top 10% of cases, I was referring to Revenue’s top income grouping, those with incomes greater than €275,000. I am also looking at the latest actual figures – those for 2012. The 2016 figures are projections.

Sorry for the confusion.

The top 10% would include those with incomes:

Over €275,000
€200,000 – €275,000
€150,000- €200,000
€100,000 – €200,000
€75,000 – €100,000, and
a portion of those
€60,000 – €75,000

The lowest 10% would all have incomes under €10,000, with 2.11% of overall gross income and 0.06% of overall tax paid.

I think a highest and lowest 10% grouping covers too many income deciles and does not give an informed picture of the progressivity of the Irish tax system.

Is it helpful to group people with incomes of €60,000 with those who have incomes in excess of €1m?

The percentage of income and tax paid by the highest 10% varies within their income groupings.

For instance, those with incomes between €75,000 – €100,000 had 11.25% of overall gross income and paid 14.67% of overall tax.

Those with incomes of over €275,000 had 6.58% of overall gross income and paid 13.61% of overall tax.

As mentioned previously, a breakdown of those with incomes over €275,000 would be helpful.


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## Sarenco (31 Dec 2015)

Sophrosyne said:


> As mentioned previously, a breakdown of those with incomes over €275,000 would be helpful.



Minister Noonan gave a breakdown of the top earners a couple of years ago - here's a report:

http://www.irishexaminer.com/busine...earners-will-earn-4m-average-each-251833.html

On the 2012 Revenue figures, the top 1% of all income tax cases were responsible for 9.1% of the income and paid 30.4% of the taxation.  As a proud member of the 99%, I would like to offer them my thanks and to wish them a prosperous new year!


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## Sophrosyne (31 Dec 2015)

Sarenco said:


> On the 2012 Revenue figures, the top 1% of all income tax cases were responsible for 9.1% of the income and paid 30.4% of the taxation.



How did you arrive at 30.40%?


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## Brendan Burgess (31 Dec 2015)

Here are the actual numbers from the Revenue Commissioners estimates for 2016



The highlighted bit shows that the top 11.8% of cases earned 39% of the income and paid 61% of the taxes.

The top 1.2% of cases earned 11% of the income and paid 22% of the taxes.

So it's reasonable to say that the top 1% of cases earned around 10% of the income and paid 20% of the taxes.


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## Sarenco (31 Dec 2015)

Sophrosyne said:


> How did you arrive at 30.40%?



It's IBEC's figure (which I believe includes USC, but excludes PRSI).  

I appreciate that these calculations are always somewhat contentious but the OECD reckons we now have the most progressive income tax system (including social security contributions ) in the OECD, according to their own criteria.


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## Brendan Burgess (1 Jan 2016)

Here is another approach. It is from the CSO's 2014 Survey on Income and Living Conditions.   (Scroll down to bottom of page and click on Table A2)

It takes in all the income and social transfers received.

It measures the Equivalised Income - A single person with an income for €30,000 has an equivalised income of €30,000. A couple without any dependents both of whom earn €30,000 each have an equivalised income of €36k (€60k/1.66). A couple with 2 kids  with a total income of €30k have an equivalised income of €13k (€30k/ 2.32)

I have adjusted the figures so that Occupational Pensions are moved from social transfers to Direct income.  People earn their occupational pension.



This ties in with the figures I have heard mentioned before.  The top 30% of people fund the bottom 60% who are net recipients.
Brendan


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## Sophrosyne (1 Jan 2016)

Brendan Burgess said:


> Here are the actual numbers
> 
> The highlighted bit shows that the top 11.8% of cases earned 39% of the income and paid 61% of the taxes.
> 
> ...



Brendan,

What is the source of this table and what year does it represent?


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## Brendan Burgess (1 Jan 2016)

Hi Sop

Apologies. I have now edited the original post to include the source as follows:



Brendan Burgess said:


> Here are the actual numbers from the Revenue Commissioners estimates for 2016


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## Brendan Burgess (2 Jan 2016)

The Irish Tax Institute has a good pre-Budget briefing on its [broken link removed] 


from which I compiled the following


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## Protocol (2 Jan 2016)

Note that everything so far ignores indirect taxes.

Also note that as market earned income is so skewed in Ireland, you would expect the higher earners to be paying most income tax.

Of course the top two deciles pay most income tax, because in those deciles are found most dentists/doctors/landlords/solicitors/CEOs.

The key question is - why do so many people have so little direct earned income?


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## Protocol (2 Jan 2016)

[broken link removed]

The income tax system is clearly very progressive in Ireland.


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## Protocol (2 Jan 2016)

When you account for indirect taxes, the lower deciles pay more tax:

[broken link removed]

See charts 6 and 7.


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## Brendan Burgess (2 Jan 2016)

Protocol said:


> When you account for indirect taxes, the lower deciles pay more tax:



Hi Protocol

I have exposed that particular fallacy in detail elsewhere. In short, the income of the bottom decile is half their expenditure.  So the tax they pay as a proportion of their income is correspondingly higher. 

And they spend a proportionately higher share of their expenditure on tobacco and alcohol which have the highest levels of indirect tax. 

Most of the essentials , such as rent, food and public transport have no indirect taxes.  

Brendan


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## Sarenco (2 Jan 2016)

Surely it would be very surprising if the lower deciles didn't pay a proportionately higher % of their gross income in indirect taxes?

However, it would be interesting to know how Ireland compares with other jurisdictions in terms of our levels of indirect taxes.  For example, excise duties and local authority taxes are much higher in some countries than is the case here.


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## Sophrosyne (3 Jan 2016)

Protocol said:


> Also note that as market earned income is so skewed in Ireland, you would expect the higher earners to be paying most income tax.



Actually, you are right Protocol. It is probably the crux of Ireland’s problem.

According to Revenue statistical reports,* 50%* of tax cases consistently have gross incomes of €27,000 or less. Remember, jointly assessed married couples are counted as one tax case.

Year on year this represents 17.5% to 18.5% of the total income charged and between 2% and 4% of the total income tax/USC paid.

I reckon the preponderance of the lowest 50% are employed by indigenous SMEs who do not grow their businesses.


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## Brendan Burgess (3 Jan 2016)

The OECD has done a huge report based on the Revenue Commissioners actual data. It is so full of data, that it is a bit overwhelming. But it dispels a lot of myths.  The tax system in Ireland is not only very progressive, but it has become more progressive in recent years.

Taxes, income and  economic mobility in Ireland


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## Brendan Burgess (3 Jan 2016)

This really surprises me, but on reflection it probably makes sense.

32. Part of the personal income tax system is the Universal Social Charge (USC), which was
introduced in 2011 and replaced the health and income levies.  The USC has some unique features: it has
four income bands for employees, corresponding to the rates of 1.5%, 3.5%, 7% and 8%, respectively
and the tax base is broader than the personal income tax base allowing fewer tax allowances and no reduction
arising from tax credits. Overall the USC increased the progressivity of the income tax system, compared
with the previous health and income levies which had flat contribution rates (Figure 6 and 7).


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## Sophrosyne (3 Jan 2016)

I think we also have to look at why the Irish tax system needs to be so progressive.

The reports states that:

2. The distribution of income before tax and transfers (“market income”) in Ireland is one of the most unequal in the OECD (OECD, 2015a; O’Connor and Staunton, 2015). There is a high concentration of income at the top of the distribution, though less so than in some other countries (Haugh et al., 2015).

High market income inequality by international standards appears to be driven to a greater extent by the lower end of the distribution*: the income share of the bottom 20% households is the lowest in the OECD countries* (Haugh et al., 2015, drawing on the OECD Income Distribution Database).


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## Purple (4 Jan 2016)

Sophrosyne said:


> I think we also have to look at why the Irish tax system needs to be so progressive.


That's the wrong question; we should be asking why we have so many unskilled and low skilled people in our country. 
The reason people are low paid is that they are low skilled. That's the easy bit to answer.


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## Sarenco (4 Jan 2016)

I wonder is it possible that the highly progressive nature of our income tax system and our very significant level of social transfers are having the perverse effect of actually increasing income inequality (before tax and transfers) in that they disincentive work and/innovation?

In other words, does seeking to "cure" the symptoms of income inequality at some point actually start to exacerbate the underlying problem?


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## Sophrosyne (4 Jan 2016)

Purple said:


> That's the wrong question; we should be asking why we have so many unskilled and low skilled people in our country.
> The reason people are low paid is that they are low skilled. That's the easy bit to answer.



The problem is that we have a very small indigenous economy mostly made up of small firms who cannot afford to pay OECD average levels of pay. The same unskilled or indeed skilled people can command a higher wage in other countries for exactly the same work.


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## Gordon Gekko (4 Jan 2016)

That could be a dangerous road to go down...

"Those people earn lots, so let's tax them a lot. Hmmm...they still earn lots, so let's try and reduce their income too."

Some view our system as progressive. I view it as regressive. We reward sloth and inertia and we punish success and initiative. I know people who could easily do more but they couldn't be bothered given the level of income tax and USC/PRSI.


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## Brendan Burgess (4 Jan 2016)

Sophrosyne said:


> High market income inequality by international standards appears to be driven to a greater extent by the lower end of the distribution*: the income share of the bottom 20% households is the lowest in the OECD countries* (Haugh et al., 2015, drawing on the OECD Income Distribution Database).



Hi Sop 

High market income inequality in Ireland? Think about it for a while. Do you really think that we are more unequal than countries like Greece or Spain which have much higher levels of unemployment and where there is a higher percentage of very wealthy people? I was intrigued by that when I saw it first as it just didn't seem right. 

Income inequality is measured on a household basis. And we have around 22% jobless households in Ireland. The next highest in the EU is the UK at 13%. Countries with much higher rates of unemployment have much lower rates of jobless households?



Sarenco said:


> our very significant level of social transfers are having the perverse effect of actually increasing income inequality (before tax and transfers) in that they disincentive work and/innovation?



Got it in one. For many households the level of social welfare, housing and health are so high that they prefer to remain jobless. 

If we cut Jobseekers Allowance and Disability Benefit (another area where we are top of the pops) , we would find ourselves shooting up the pre tax income equality stakes. 

Brendan


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## Sarenco (4 Jan 2016)

Sophrosyne said:


> The problem is that we have a very small indigenous economy...



Does that really have a material impact on income equality?  Less than 10% of the workforce is employed by foreign owned enterprises and the majority of those jobs are in the manufacturing sector, which is hardly renowned for its oversized wages.


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## orka (4 Jan 2016)

Sophrosyne said:


> * the income share of the bottom 20% households is the lowest in the OECD countries* (Haugh et al., 2015, drawing on the OECD Income Distribution Database).





Brendan Burgess said:


> High market income inequality in Ireland? Think about it for a while. Do you really think that we are more unequal than countries like Greece or Spain which have much higher levels of unemployment and where there is a higher percentage of very wealthy people? I was intrigued by that when I saw it first as it just didn't seem right.



The report explains what must be at least part of the cause (but then doesn't really bring this explanation into the narrative/conclusions which might have helped readers).

"_In this dataset, benefit dependence is the highest in low- to middle- income classes but it is low in the lowest income classes, i.e. the first and second deciles. This largely reflects the low take-up rate of benefits, due to the demography of deciles 1 and 2: it is composed of various kinds of groups but typically those with low earned income but no eligibility to welfare payment (for instance, tertiary students living with their parents)_" 

We have a young population and a large participation in third level education so it's not surprising that we have a lot of employment 'dabblers' who appear to have low incomes but are not actually seeking full-time employment (and nor does the low income have to fully support them).


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## Brendan Burgess (5 Jan 2016)

Orka

Great spot. I have never heard that explanation before. Mind you if I had read it in the report, I might not have twigged it either!

It also explains why those in the bottom decile spend twice as much as they earn. If they are students, they are presumably spending their parents' money. 

Brendan


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## odyssey06 (5 Jan 2016)

You will probably find that age is one of the biggest factors in determining the spread across income brackets... And remember that it's not a static list... From one year to the next, one decade to the next, those students will (hopefully!) rise from the lowest brackets into the middle and top brackets.


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## Firefly (5 Jan 2016)

odyssey06 said:


> You will probably find that age is one of the biggest factors in determining the spread across income brackets... And remember that it's not a static list... From one year to the next, one decade to the next, those students will (hopefully!) rise from the lowest brackets into the middle and top brackets.



The same goes for a lot of people on lower wages you would imagine. You might start low and then move up the ladder / to a different firm.


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## Purple (6 Jan 2016)

Firefly said:


> The same goes for a lot of people on lower wages you would imagine. You might start low and then move up the ladder / to a different firm.


And that's the key point when it comes to low wages and the minimum wage. In a discussion about poverty it doesn't really matter what the minimum wage is, what matters is how long people spend on it.


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## trasneoir (6 Jan 2016)

Purple said:


> That's the wrong question; we should be asking why we have so many unskilled and low skilled people in our country.
> The reason people are low paid is that they are low skilled. That's the easy bit to answer.


Source?


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