"We are the only OECD state where some get back more than they pay in income tax"

[Firefly]

I was asking you, for your opinion. Do you think it would be stupid or not, not to avail of the maximum allowable and legal deduction (in effect, to exaggerate the expense claim in order to reduce tax liability)?

Are you sure you have this correct? I thought we covered this? Personal expenses claimed for business use are not legal, regardless of what Revenue say..

To add....

I don't get what all the fuss is about. First you say PAYE workers don't get a break:

Expect maybe for the PAYE worker, who doesn't even get the opportunity to touch their own income before it's whisked away to Revenue and Social Protection - where is the equality of opportunity for PAYE worker's there?

Then you go on about various self-employed people: painter & decorator, strawberry seller and plumber, all using their mobiles for business and personal use and then admit to availing of the perk yourself!

I have direct experience with Revenue on this exact matter. Only in my case it was for staff mobile phones - they were set at a fixed monthly rate for business use with certain limitations (calls outside Roi, data usage etc would incur additional charges payable by the employee).
The fixed monthly bill was an allowable cost as it was for business use. It was accepted that a certain amount of personal usage would apply, but as it didn't affect the monthly bill, then this usage would be disregarded.

So I am lost - are you saying the self-employed get a better break or something? As I have been saying for a few pages now, business expenses should be for business use only and if personal expenses are put in as business expenses they are not legal, whatever Revenue say. It's up to each person to determine what they do.

 

[TheBigShort]

personal use and then admit to availing of the perk yourself!

??? The employees may use the phones for personal use, but they are not profiting directly - that is, the cost of the phones usage is used by the employer to reduce tax liability.

So I am lost - are you saying the self-employed get a better break or something?

Not at all, all I am saying that the self-assessment system lends itself to the possibility of exaggerated expense claims. The point was raised earlier that indeed some 40% of self employed tax returns are under declaring by €18,500 on average. Obviously, sometimes in error.
To my mind, it is wholly natural to reduce your tax bill by as much as you can. And if Revenue rules facilitate that in anyway then a taxpayer would be stupid not to take advantage of it.

 

[Firefly]

??? The employees may use the phones for personal use, but they are not profiting directly - that is, the cost of the phones usage is used by the employer to reduce tax liability.

Who pays the phone bill, you or your employer?

Not at all, all I am saying that the self-assessment system lends itself to the possibility of exaggerated expense claims. The point was raised earlier that indeed some 40% of self employed tax returns are under declaring by €18,500 on average. Obviously, sometimes in error.

I agree. It's a self-assessment system and is therefore open to abuse. It's up to Revenue to pursue.

To my mind, it is wholly natural to reduce your tax bill by as much as you can. And if Revenue rules facilitate that in anyway then a taxpayer would be stupid not to take advantage of it.

I hear what you are saying, but unless it's written into law Revenue could take a different stance at any time. Granted, it would probably only happen if they found against you on other fronts.

 

[Protocol]

Fresh analysis from Seamus Coffey.

The OECD have fixed some bad data: they were using the wrong average earnings data,

Taxing Wages and the OECD Average

Last year we queried how it was that the OECD placed Ireland in the “low tax” group for it measure of the net personal income tax rate (inc...

economic-incentives.blogspot.com

 

[Protocol]

 

[Protocol]

As I have repeatedly said, our MTR on average earnings are too high, but our effective tax rates are not:

 

[cremeegg]

So we need to shift the average tax rate from 20% to 25%. Interesting that the average rate corresponds with the actual standard rate.

And we need to shift the marginal rate down from 50% to 35%.

At a macro level what would this achieve. Surely the incentives it would provide to the economy are exactly what is not need in an economy nearing full employment with capacity restraints in so many areas.

 

[Purple]

The changes should be well flagged and slow, maybe over 5-10 years.
I'm not sure the marginal rate should be as low as 35%.
Just bringing everyone into the tax net would be better. I'd like to see what impact that would have on those Eurostat figures.

 

[Protocol]

I suggest rates of 20, 30, 40, 50.

Keep the top 50 rate, but only for income over at least double mean earnings.

Say 90k or 100k starting point for top 50% MTR.

 

[NoRegretsCoyote]

I suggest rates of 20, 30, 40, 50.

Keep the top 50 rate, but only for income over at least double mean earnings.

Say 90k or 100k starting point for top 50% MTR.

Multiple rates make it more difficult to compute and also for the taxpayer to understand what they have to pay. If it was me I would have a tax-free allowance of 13k* and then remainder at 35% on all income.

Meanwhile the change in the reference rate by the OECD is very important as it really changes the conversation on tax in Ireland. I've long said that the benchmark for debate should be average full-time wages. It is about €47.5k, if you look at Table 5 here.

In the housing costs debate people continuously cite the average earnings figure which is €38.8k which includes people on part-time earnings. It ignores the fact that most people buy houses at a point in their lives when they are in full-time employment, and usually with another person. A couple earning average full-time wages will gross €95k a year. At these earnings a house at €300k looks pretty affordable.


*equivalent to state pension