Irish Times: Rich Taxed at rate below average worker

[Brendan Burgess]

This is the scandalous headline in today's Irish Times

The headline does not reflect what the article says.

The headline in the online edition is better but still misleading:

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

This is the reality:

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.

In other words, people with incomes lower than the average industrial wage pay a lower tax rate than the average worker.

Ireland has the most progressive income tax system and the people in the Irish Times refers to that later in the article. But why not make that the headline?

It would also be useful to get a profile of some of the 90 people who have enormous wealth but low income. I suspect that it is a residency issue and they have high assets and income outside Ireland which is not taxable in Ireland.

Brendan

 

[Brendan Burgess]

RTE has reported it fairly.

25% of richest taxpayers have reportable income below average industrial wage

A quarter of Ireland's richest taxpayers - defined by the Revenue as having net assets worth more than €50 million - have a reportable income below the average industrial wage.

 

[odyssey06]

In that 83 people could there be retired musicians, actors, footballers, euromillions winners or people who inherited a very large sum and are just living from their assets and have very low current inflow of income?

 

[Brendan Burgess]

Hi Odyssey

Neither article explains properly how people with such great wealth have such low taxable incomes. Generally speaking, high assets will generate high income.

So Capital Allowances is the big item. And loss relief the next biggest.

It would be interesting to know what those capital allowances are for? It's hardly buying a new tractor?

29% of the HWI derive their income from property so it's not surprising that they have losses forward.

 

[Brendan Burgess]

I attach the sections of the report from the C&AG

Some excerpts

The average effective rate is 39.2% compared to 16.3% for all workers.

18.61 Despite the fact that HWIs have net assets of at least €50 million each, 42% report
taxable income below the high income earner restriction threshold of €125,000 and 25% report taxable income below the average annual industrial wage.


17 are non resident (7 had no discernible activity in Ireland)

83 (25%) had taxable income of less than the average industrial wage.

18.18 Looking at taxable income, 140 HWIs (42%) had taxable income of less than €125,000.

 

[Itchy]

Brendan, that is the Comptroller and Auditor Generals report and not a Revenue report. Interesting that 9% of HWIs are in the farming/Agri sector!

 

[Brendan Burgess]

Thanks

Typo corrected now.

There were 480 individuals in this survey.

9% would be 53 people in the farming/agri sector with assets over €50m.

Agri food is a big part of the economy. Would it include the likes of Larry Goodman and the other owners of meat factories?

Brendan

 

[Protocol]

They would be the obvious answers for the agri food sector, yes.

Meat processors.

The dairy sector is mostly co-op or plc.

 

[Gordon Gekko]

There are plenty of people in that space...Goodman, the Allens, Quelys, Mallons, etc.

 

[fistophobia]

I expect some sort of wealth tax in next budget.
One could have zero income tax liability, if you were simply spending down savings, or taking income from undertakings - again, not subject to income tax.

 

[T McGibney]

It would be interesting to know what those capital allowances are for? It's hardly buying a new tractor?

What a weird comment.

1,796 tractors sold in Ireland in 2017. https://www.agriland.ie/farming-news/who-sold-the-most-new-tractors-in-ireland-in-2017/

Every town has a middling-sized factory with more plant and machinery than that. Imagine how much Intel alone have in Leixlip.

 

[Brendan Burgess]

Hi Tommy

It has nothing to do with Intel.

Did you look at the figures?

A small number of high wealth individuals (between 83 and 183) claimed €45 million in capital allowances.

It seems very high to me.

I would have thought that most of the owners of meat factories would own them through limited companies and so individuals would not generally have very claims for capital allowances.

It's a long time since I did a capital allowance tax calculation. If I buy a tractor for €500k can I claim the full amount or 20% of it?



Brendan

 

[T McGibney]

I would have thought that most of the owners of meat factories would own them through limited companies and so individuals would not generally have very claims for capital allowances.

Same here, but I have heard of large hotels being owned personally, presumably to avoid double CGT hits. Maybe the same applies to some industrial concerns?

If I buy a tractor for €500k can I claim the full amount or 20% of it?

Is there any such thing as a €500k tractor? I've never heard of one. I have heard of €100k tractors, but I'd expect these would be the preserve of large scale agri contractors rather than farmers.

If you buy a tractor or similar equipment you can claim 12.5% capital allowances each year for 8 years. Average annual tax saving for a higher rate taxpayer would be around 6% of the spend. Hardly over-generous.

(€45 million capital allowances arising in a single year from tractor purchases would necessitate a total spend of €750 million on tractors, or roughly €700,000 for every tractor sold in the country in 2017)

 

[demoivre]

Is there any such thing as a €500k tractor?

You won't have much change out of it for the Fendt 1050 Vario.

 

[T McGibney]

You won't have much change out of it for the Fendt 1050 Vario.

Wow! Some bus that is.

Fendt 1050 Vario. The Fendt 1050 Vario was voted the Tractor of the Year in 2015, it has a 12.4L Man engine putting out close to 517hp. This top of the range Fendt has a list price of €388,000 plus VAT and is capable of doing a top speed of 60km/h.

 

[Brendan Burgess]

(€45 million capital allowances arising in a single year from tractor purchases would necessitate a total spend of €750 million on tractors, or roughly €700,000 for every tractor sold in the country in 2017)

Eh, that was the point I was making in the first place, which you described as "a weird comment"!

 

[T McGibney]

Eh, that was the point I was making in the first place, which you described as "a weird comment"!

Weird that tractors were mentioned at all Brendan!

 

[Sophrosyne]

This might give some insight as to reliefs claimed by HNWIs. See final page.

 

[Brendan Burgess]

HI Sop

that is very useful.

It is obviously for all taxpayers but it includes the 80 High Net Worth individuals who paid no tax.

What is this bigggie?

 

[Sophrosyne]

It represents the carry forward of unused “specified reliefs”, i.e. High Earner reliefs that have been restricted in previous years.