Dave Vanian
Registered User
- Messages
- 1,327
Income Tax at 40% on €12,500 = €5,000.
Tax relief on a pension contribution of €12,500 at 40% = €5,000.
Where I differ from you guys is that I'm looking at it from the point of view of getting the income tax returned that you paid on the gross income whereas you're looking at it from the p.o.v. of getting the tax back on the net income they leave you.
Those would amount to the same thing but for the effect of other deductions.
Imagine it's done this way.
The government takes away 40% tax on €12,500, i.e. €5,000 leaving you with €7,500
Then they take away €1,500 in PRSI/USC.
Then the government says that they are going to refund you the tax you paid.
You say that'll be €5,000 please.
Then they say but you only have €6,000 so that means you're only getting €4,000 because
€6,000 only grosses up to €10,000.
The fact that you'd have €7,500 but for the other money they took off you is ignored.
Because of that the effective tax relief is 32%.
10k with 40% income tax deducted. Are you asking for a refund of more income tax than you actually paid?Because the 40% relief
is calculated on a lower figure than the original tax deduction.
That seems to be the case alright.10k with 40% income tax deducted. Are you asking for a refund of more income tax than you actually paid?
I've always thought the pension industry calling it 40% tax relief was a bit weird. It should be presented in the same way as it would for a company; an allowable deduction. Although, having thought that, I never expected it could confuse punters so badly.That seems to be the case alright.
6 pages in and the original poster is still convinced that they're right in spite of the overwhelming evidence to the contrary.
It beggars belief...
Maybe this is the Askaboutmoney equivalent of Candid Camera or something?
What are you talking about?It's €10,000 into a pension but if they returned all the tax that they'd deducted it would be €11,000.
Any commercial enterprise calculating refunds in such a manner would probably be in breach of consumer law because the 40% relief
is calculated on a lower figure than the original tax deduction. It's sharp practice, at best.
I'd have it so that just as tax is calculated on gross salary so too should rebates be determined in that way.So if you were the Minister for Finance, how would you change things?
No:So in the case of our €12,500 the refund rate might be 32% (€4,000) while the tax rate is 40% (€5,000).
Income Tax at 40% on €12,500 = €5,000.
Tax relief on a pension contribution of €12,500 at 40% = €5,000.
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