Revenue’s role is to ensure compliance with tax legislation and to collect the correct tax due based on taxable income determined in accordance with the relevant tax legislation.
In computing taxable income, the legislation provides for deductions in respect of various tax credits and reliefs including losses incurred both current and carried forward, subject to conditions. These deductions are available to all taxpayers.
The Chapter on the “Management of high wealth individuals’ tax liabilities” in the recent 2017 Annual Report by the Comptroller and Auditor General (C&AG) states that the effective tax rate for high wealth individuals (HWIs) is more than double the rate for all income tax payers. The Report also identifies that 83 HWIs had taxable income of less than the average industrial wage.
The Chairman of the Revenue Commissioners attended the Public Accounts Committee meeting on 15 November. During the detailed discussion with the Committee, the Chairman outlined the various lifestyle and wealth management features of HWIs. In relation to the 83 HWIs with taxable income of less than the average industrial wage, he outlined that this low taxable income is related to the circumstances of the individuals which includes: family members of HWIs (25); non-resident individuals (21); individuals no longer categorised as HWIs (17); entitlement to credits and reliefs (15) with the remaining individuals having low income in that year. It is important to point out that the deductions claimed which lower a taxpayer’s taxable income are legitimate credits against tax liabilities. The Chairman also assured the Committee that there is no evidence, and Revenue does not assume, that wealthy individuals are more likely to be tax non-compliant.
Measures were introduced in the 2006, 2007 and 2010 Finance Acts to restrict the use of certain tax reliefs and exemptions by high income earners. These measures ensure that these individuals have an effective tax rate of approximately 30%. The recent report on the ‘Analysis of High Income Individuals’ Restriction 2016’ published by Revenue in September of this year shows that these restrictions impacted on 521 individuals in 2016 resulting in the collection of additional income tax of €38.5m.