Dáil Éireann Debate, Tuesday - 21 March 2023
313. Deputy Neasa Hourigan asked the Minister for Finance his views on the decline in both the total number of individuals subject to the high-income individuals’ restriction and the estimated additional income tax due to the restriction in each of the each years since 2010; if he believes that the total number of individuals subject to the restriction should have been increasing in a growing economy; and if he will make a statement on the matter. [12753/23]
View answerThe restriction of reliefs' measure for individuals on high incomes, who make significant use of certain specified tax reliefs, was announced in Budget 2006 and came into effect from 1 January 2007.
The intention of the restriction is to seek to improve the balance between promoting tax equity in relation to those on high incomes while at the same time maintaining the incentive effect of the various tax reliefs introduced to achieve a particular public good.
The measure limits the use of certain tax reliefs and exemptions by those on high incomes. Prior to the introduction of this restriction, such individuals, by means of the cumulative use of various tax incentive reliefs, had been able to reduce their tax liability to very low levels. The restriction works by limiting the tot al amount of specified reliefs that a high income individual can use to reduce his or her tax liability in any one tax year.
The restriction, as introduced, ensured that individuals with adjusted income exceeding €500,000 paid at least an effective rate of tax of approximately 20% on that income. Where adjusted income was between €250,000 and €500,000, a tapering system ensured that there was a graduated introduction of the restriction, with the effective rate of tax increasing towards 20% as adjusted income increased towards €500,000.
In Budget 2010, changes to the restriction from the 2010 tax year were announced. Those individuals with adjusted income exceeding €400,000, as a result, now pay at least an effective income tax rate of approximately 30% on that income, while individuals now become subject to the restriction and the associated taper, where adjusted income is €125,000 or greater and where they claim €80,000 or more in specified reliefs.
In Finance Act 2011, the Universal Social Charge was introduced. As the USC is charged on an individual's aggregate income from all sources, the amount payable by an individual is not affected by the high earners' restriction. To examine the total amount of income tax paid, the USC is included.
The continued reduction in the numbers of those subject to the restriction is due to the elimination of a range of specified tax reliefs that are available to individuals. This has reduced the overall amount of income being sheltered from tax under these reliefs and consequently falling under the restriction each year. The decline in additional income generated by the restriction over recent years is an indicator of its successful operation.
The following table sets out statistics relating to the period between 2010 and 2019 (the most recent year for which data are available):
|
YEAR |
TOTAL NUMBER OF INDIVIDUALS |
ESTIMATED ADDITIONAL INCOME TAX €M |
|
2019 |
303 |
23.4 |
|
2018 |
358 |
26.4 |
|
2017 |
439 |
33.1 |
|
2016 |
521 |
38.51 |
|
2015 |
625 |
47.21 |
|
2014 |
779 |
54.73 |
|
2013 |
904 |
60.43 |
|
2012 |
1,050 |
63.21 |
|
2011 |
1,143 |
63.6 |
|
2010 |
1,544 |
80.18 |
Revenue's annual reports on the measure, including the report published in 2022 in respect of 2019 are available at the following link:
www.revenue.ie/en/corporate/information-about-revenue/research/statistical-reports/high-income-earners-reports.aspx.
