I am informed by the Revenue Commissioners that the total numbers of income earners claiming tax relief for pension contributions for 2010, the latest year for which the necessary detailed figures are available, is estimated to be of the order of 760,000. These include claims from employees for contributions to occupational pension funds and from the self-employed and others for contributions to personal pension plans - Retirement Annuity Contracts (RACs) and Personal Retirement Savings Accounts (PRSAs) - to the extent that these contributions have been included in their personal tax returns. With regard to occupational pensions (that is, schemes set up by the employer), the figures in respect of employee and employer contributions are available only in aggregate form on a tentative basis. Information on such contributions is not captured in such a way as to make it possible to provide disaggregated figures by tax rate.
A breakdown of the numbers of claimants by tax rate is only available at present in respect of the tax relief for contributions to Retirement Annuity Contracts (RACs) and Personal Retirement Savings Accounts (PRSAs) to the extent that these contributions have been included in the personal tax returns of taxpayers. The available data is set out in the following tables:
Retirement annuity contracts — by tax rate 2010
|
Tax Rate
|
Number of Cases
|
|
Standard Rate (20%)*
|
36,281
|
|
Higher Rate (41%)
|
28,234
|
|
Total
|
64,515
* Includes claimants benefiting from marginal relief or with zero tax liability
|
Personal Retirement Savings Accounts — by tax rate 2010
|
Tax Rate
|
Number of Cases
|
|
Standard Rate (20%)*
|
11,896
|
|
Higher Rate (41%)
|
10,338
|
|
Total
|
22,234
* Includes claimants benefiting from marginal relief or with zero tax liability.
|
The figures for RACs and PRSAs do not include contributions made by employees through employers’ payroll systems and in respect of which tax relief is provided on the net pay basis. Information on such contributions is not captured in such a way as to make it possible to provide disaggregated figures by tax rate.
The figures for RACs and PRSAs in the tax rate table are taken directly from filed income tax returns which represent about 83 % of all income tax returns expected for 2010. The Deputy should be aware that designation of a tax rate to claimants is based on identifying the top tax rate applying to the taxable income of each claimant. While the effect of the pensions relief may reduce a taxpayer’s taxable income to a level where they will be liable at the standard rate, any such taxpayers are still reflected in the tables concerned as higher rate taxpayers.
Regarding the checks that are in place to ensure that people are actually paying into pension schemes, the Risk Evaluation Analysis and Profiling (REAP) system, developed by Revenue, categorises taxpayers in accordance with defined risk criteria and includes data in relation to claims made for tax credits and/or allowances including claims for pension contributions. Where a case is selected for Revenue intervention all identified risk items are identified.
I am further informed by the Revenue Commissioners that self-employed taxpayers are required to claim tax relief for pension contributions in their annual tax returns. Where Revenue, as part of its annual compliance programmes, using the REAP system or some other means, selects a particular return for examination, the Revenue auditor would, in appropriate cases, carry out verification checks on the person’s pension tax relief claim to ensure that contributions were actually made and that the correct amount of tax relief was claimed.
Where employers deduct pension contributions from the wages/salaries of employees, Revenue, in carrying out checks on the proper operation of the PAYE system would, in appropriate cases, seek verification that pension tax reliefs were being correctly applied, including verifying that pension contributions, both employer and employee, were actually paid into the pension fund.
I am also advised that there is no evidence to suggest that the number of people claiming pension reliefs is out of line with the number contributing to pension schemes.
