Why do we hit the top rate of tax so early, while having such a low effective rate?

Status
Not open for further replies.
Yes, McCreevy did introduce a move towards individualisation.

The tax band / SRCOP was not fully individualised, though.

Yes, there was a bit of a backlash, and so the Govt replied with the Home Carer's tax credit, now worth 810.
 
The answer is in the question.

Because we have so many reliefs, exemptions, tax credits, etc., which cause the effective rate to be too low for many people, then the MTR must be high, in order to collect a given amount of revenue.
 
The Institute of Taxation has produced a very comprehensive document

[broken link removed]

From page 25 - Effective tax rates for employees

Salary |€18,000|€36,000
Germany|27%|36%
Netherlands|20%|32%
Spain|19%|26%
Sweden|17%|23%
United States|15%|19%
UK|12%|22%
Switzerland|6%|19%
Ireland|5%|22%
Low paid workers in Ireland pay too little tax.
 
The lower paid must pay their fair share of tax, so it must be increased.

If that is done, then the 20% rate band can be increased so that fewer people hit the 52% band so early.
 
Brendan Burgess said:
The Institute of Taxation has produced a very comprehensive document

[broken link removed]

From page 25 - Effective tax rates for employees

Salary |€18,000|€36,000
Germany|27%|36%
Netherlands|20%|32%
Spain|19%|26%
Sweden|17%|23%
United States|15%|19%
UK|12%|22%
Switzerland|6%|19%
Ireland|5%|22%
Low paid workers in Ireland pay too little tax.
Click to expand...

Is that just income tax? Does it include USC for the Irish figure (which is an income tax)? Or is it income tax & social insurance in all cases?

Not being argumentative by the way - just checking, for clarity!
 
mandelbrot said:
Is that just income tax? Does it include USC for the Irish figure (which is an income tax)? Or is it income tax & social insurance in all cases?

Not being argumentative by the way - just checking, for clarity!
Click to expand...

Yes, it includes USC and PRSI, says so on Page 24
 
I have repeatedly provided the anecdotal evidence of my parents on 45k paying 5%-8% approx income taxes, including USC and PRSI.


Unreal low direct taxes, plus they get travel passes, med cards and HBP.


This means free TV licence, 35 off elec pm and now 100 off water bill.


No other country is as generous, while at the same time applying MTR of 52% on people over 32,800.


No wonder workers have the perception that Irl is a high tax country, when they face 52% MTR on income over 32,800 single / 41,800 one-earner married couple.

Whereas, for many people (like my parents) the ATR average tax rate is unbelievably low.
 
Brendan Burgess said:
The Institute of Taxation has produced a very comprehensive document

[broken link removed]

From page 25 - Effective tax rates for employees

Salary |€18,000|€36,000
Germany|27%|36%
Netherlands|20%|32%
Spain|19%|26%
Sweden|17%|23%
United States|15%|19%
UK|12%|22%
Switzerland|6%|19%
Ireland|5%|22%
Low paid workers in Ireland pay too little tax.
Click to expand...

Interesting that they chose 18000.

Presumably because its the largest round number they could use that wouldn't include employee's PRSI - an employee pays no PRSI unless their weekly pay exceeds €352 (or 18304 annualised).

So at 18,303 the effective rate is 5.2%, and at 18,305 the effective rate is 9.3%.

Not saying the effective rate isn't too low at those levels of income, but it's another example of a stat being cherry picked to make a point, and giving a slightly exaggerated impression.
 
mandelbrot said:
Interesting that they chose 18000.

Presumably because its the largest round number they could use that wouldn't include employee's PRSI
Click to expand...
Or perhaps because 18K is pretty much exactly the annual rate for someone working fulltime on minimum wage - so it's a good starting point for comparing taxes of fulltime workers.
 
Few things;
1.Pensioners paying too little Tax has been largely debunked on other threads.
2. {Lower paid must pay their fair share of tax}. Not much point in doing that ,if it means we make their income up to a living wage by re-paying Family Income Supplement (FIS) to make up for the accepted fact that Ire is a lowish wage economy.
3. Individualisation was brought in by Mr Mc Creevy at Europe bequest. Does that mean that work in home ie rearing children is not real constructive work ?Is that equitable for society?
4. Maybe that in these nominally higher taxed countries they have better social help eg childcare.

I am not sure Statistics such as shown can give a broad enough picture.
 
Gerry Canning said:
Few things;
1.Pensioners paying too little Tax has been largely debunked on other threads.
Click to expand...

Really? I've read those threads and didnt get that impression. In fact I got the opposite impression.

Gerry Canning said:
2. {Lower paid must pay their fair share of tax}. Not much point in doing that ,if it means we make their income up to a living wage by re-paying Family Income Supplement (FIS) to make up for the accepted fact that Ire is a lowish wage economy.
Click to expand...
FIS is only payable in respect of families, and subject to certain conditions.

Gerry Canning said:
Few things;
3. Individualisation was brought in by Mr Mc Creevy at Europe request.
Click to expand...

I'm not sure that's true. In fact I'm almost certain it's totally untrue,
 
mandelbrot said:
Interesting that they chose 18000.

Presumably because its the largest round number they could use that wouldn't include employee's PRSI - an employee pays no PRSI unless their weekly pay exceeds €352 (or 18304 annualised).

So at 18,303 the effective rate is 5.2%, and at 18,305 the effective rate is 9.3%.

Not saying the effective rate isn't too low at those levels of income, but it's another example of a stat being cherry picked to make a point, and giving a slightly exaggerated impression.
Click to expand...

That is an excellent point. It is crazy that we have such a step in the system.

Brendan
 
Gerry Canning said:
Few things;

3. Individualisation was brought in by Mr Mc Creevy at Europe bequest. Does that mean that work in home ie rearing children is not real constructive work ?Is that equitable for society?
Click to expand...


That is incorrect.

Individualisation was designed to boost the supply of second-earner spouses into the labour market.

At the moment, couples often pay less tax on marriage.

Surely what we want is tax to fall due to children.

So I suggest a move to full indivdualisation, combined with the re-introduction of child tax credits.
 
mandelbrot said:
Interesting that they chose 18000.

Presumably because its the largest round number they could use that wouldn't include employee's PRSI - an employee pays no PRSI unless their weekly pay exceeds €352 (or 18304 annualised).

So at 18,303 the effective rate is 5.2%, and at 18,305 the effective rate is 9.3%.

Not saying the effective rate isn't too low at those levels of income, but it's another example of a stat being cherry picked to make a point, and giving a slightly exaggerated impression.
Click to expand...

The PRSI system had two allowances/exemptions.

The first was a PRSI-free allowance for all workers of 127 pw - this was abolished a year or two ago.

The second is the PRSI exemption of 352 pw, as discussed above. This exemption causes an anomaly.

It would have been better to abolish the exemption, and bring every worker into the PRSI net, in my opinion.

The 127 pw PRSI-allowance is worth more to lower earners, so helps reduce the cost to them.
 
TASC has suggested getting rid of the Step Effect in their Pre Budget Submission Executive summary for Budget 2015

Fix Step effect in PRSI (-€25 million cost) TASC has identified an inequitable ‘step effect’ in personal income taxation, which affects people on very low incomes so that someone on €19,000 has less take home pay than someone on €18,000. TASC’s proposed refund scheme, operated by employers, would taper the onset of PRSI to address this technical anomaly at a cost of €25 million.
 
Protocol said:
That is incorrect.

Individualisation was designed to boost the supply of second-earner spouses into the labour market.

At the moment, couples often pay less tax on marriage.

Surely what we want is tax to fall due to children.

So I suggest a move to full indivdualisation, combined with the re-introduction of child tax credits.
Click to expand...
...............

I read your comment to mean that stay at home parents are not full time workers .
I have a problem in that individualisation means stay that stay at home parents are not considered important and that they should be (freed) to boost the outside labour market.
I have the opinion that homemakers are in the round as valuable in the home as they would be in the labour market.
 
T Mc Gibney;

1.Isn,t it interesting how we can both read Pensioner taxes threads differently.
2. I take on board that FIS is for families , I was trying to use FIS as an example of no point taxing on one hand and giving on the other.
3. From memory (dangerous) Mc Creevy used the Europe angle.I will admit I am not a fan of individualisation!.

Maybe my biases are showing !
 
Gerry Canning said:
...............

I read your comment to mean that stay at home parents are not full time workers .
I have a problem in that individualisation means stay that stay at home parents are not considered important and that they should be (freed) to boost the outside labour market.
I have the opinion that homemakers are in the round as valuable in the home as they would be in the labour market.
Click to expand...
I've added some emphasis to your quote and don't understand how you can read what you've read into protocol's replies. He is suggesting that child tax credits replace marriage tax credits (perhaps with the same net effect for an average family) - so that stay at home parents are not penalised and can continue their undoubtedly very valuable work. But you want to see marriage tax credits maintained so that a stay at home spouse with no children can benefit? Why?
 
Status
Not open for further replies.
Back
Top