Written Answers Nos. 59 - 65
59. Deputy Joe Higgins asked the Minister for Finance his views on the Nevin Economic Research Institute estimate that 29,000 jobs will be lost if he proceeds with a fiscal adjustment of €3.5 billion which prioritises cuts in government spending. [42255/12]
Amharc ar fhreagraFirstly, I want to assure the Deputy that all of the economic policies of the Government are designed with one main objective: that is to restore balanced economic growth so that employment can increase once again. A precondition for a resumption of balanced economic growth is sustainable public finances. As such the Government is committed to cutting the deficit and maintaining debt at sustainable levels. However, the objective of Government has been to ensure that any consolidation necessary is implemented in a credible manner, while seeking to minimise the impact on the economy and the labour market. In line with the economic literature and the broad consensus amongst various economic agencies - including the IMF, the ESRI and the Fiscal Advisory Council - we believe the most effective and growth friendly way to implement such consolidation measures is by concentrating the majority of the adjustments on the expenditure side.
Looking forward to Budget 2013, the Government believes a continuation of this focus on expenditure cuts is necessary to limit the negative impact on the economy and the labour market. Consequently, two-thirds of the forthcoming adjustment is expected to be realised from the expenditure side.
It should be acknowledged that while restoring the public finances to a sound footing is crucial for Ireland’s future, consolidation will have a negative short-run impact on the economy. Of this there is no question. However, it is the framing of this consolidation which is important and I want to assure the Deputy that the Government is conscious of the need to minimise the impact of consolidation on the labour market.
In the wake of Ireland’s recent return to the bond markets it may be easy to forget the considerable progress that has been made in getting to this point. It is imperative now that the hard yards gained in the recent past are not in vain and that those measures are followed through in order to restore confidence in the Irish economy and successfully navigate Ireland’s exit from the current EU/IMF programme.
60. Deputy Pearse Doherty asked the Minister for Finance the amount of money that would be raised in a full year by reducing the level at which persons and companies may claim interest repayments against tax for residential rental properties from 75% to 40%; and if he will make a statement on the matter. [42328/12]
Amharc ar fhreagraI am informed by the Revenue Commissioners that a breakdown between rent received from residential property and other types of property is not sought or provided in tax returns. Based on personal income tax returns filed by non-PAYE taxpayers and corporation tax returns filed by companies for the year 2010, the latest year for which this information is available, and making certain assumptions about the data it is estimated that the revenue that would be raised from reducing the level at which individuals can claim interest repayments against tax for residential rental properties from 75% to 40% could be in the region of €157m. Rental income of companies is returned as net of interest on borrowings and the figures for interest are not separately distinguished in corporate tax returns. There is no basis on which an estimate of the cost of reducing the tax relief involved could be provided. The estimated cost of 2010 residential interest relief is based on assuming that tax relief was allowed at the top income tax rate of 41% and the figure provided could therefore be regarded as the maximum Exchequer cost in respect of those taxpayers. This figure is subject to adjustment in the event of late returns being filed or where returns already filed are subsequently amended.
It should be noted that any corresponding data returned by PAYE taxpayers in the income tax return form 12 is not captured in the Revenue computer system. However, any PAYE taxpayer with non-PAYE income greater than €3,174 is required to complete an income tax return form 11. This return is the source of the figure provided in this reply in respect of individuals.
The level at which interest repayments can be claimed against tax for residential rental properties was reduced from 100% to 75% in section 5 of the Finance Act 2009.
There is no specific proposal in the Programme for Government to decrease the amount of interest on borrowings that can be offset against rental income for tax purposes, however, as a matter of course all such taxation measures and reliefs are considered in the context of the budgetary process.
61. Deputy Pearse Doherty asked the Minister for Finance the amount of money that would be raised in a full year by reducing the tax exemption for lump sum pension payments to the level of the average industrial wage with the balance taxed at the marginal rates of income tax; and if he will make a statement on the matter. [42329/12]
Amharc ar fhreagraThe following arrangements currently apply to retirement lump sums paid under pension arrangements approved by the Revenue Commissioners. Lump sum amounts up to €200,000 are paid free of tax. They are also paid free of USC. The portion of a lump sum between €200,001 and €575,000 is taxed on a ring-fenced basis at 20%. This means that no tax credits or other tax reliefs can be set against this portion of the lump sum. No USC is chargeable. Any amount of a lump sum in excess of €575,000 is taxed at the individual’s marginal rate of tax (credits and other tax reliefs are available). In this instance, USC is chargeable on the excess. These amounts are lifetime amounts with prior lump sums aggregating with later lump sums. Based on certain assumptions the average annual industrial wage is estimated at about €31,000 in 2011. As there is no general requirement for data on retirement lump sums of less than €200,000 to be returned to my Department or to the Revenue Commissioners, I am not in a position to provide definitive figures on the Exchequer impact of reducing the tax-free retirement lump sum amount from €200,000 to €31,000. Furthermore, details of the marginal rate of income tax an individual would pay on a taxable lump sum pension payment in the scenario outlined in the Deputy’s question are not available.
As an exercise that might provide some indication of the scale of the savings involved, it is estimated that just over 268,000 individuals in the public service would be on salaries of over €20,750 and less than €133,500 which, under existing pension scheme arrangements generally applying across the public service, would deliver retirement lump sums of between €31,000 and €200,000. If it is assumed that these individuals would retire in line with retirement trends from the public service in a normal year (about 2.5%), then the additional tax yield from taxing lump sums in excess of €31,000 at 20% could be approximately €100 million in a full year. In this example the additional tax yield from taxing lump sum payments in excess of €31,000 at 41% could be approximately €200 million.
I have no data on which to provide a similar estimate in relation to the private sector. I should point out that one significant difference between public sector and private sector pension schemes is that private sector schemes invariably allow scheme members the option of commuting part of their pension fund for a tax-free lump sum. This option is not available to members of public sector schemes. Depending on the impact of any tax charge on retirement lump sums, the option to commute part of a pension fund may no longer be exercised by private sector pension scheme members or may be exercised in a manner that reduces the value of the lump sum taken to minimise or avoid any immediate tax charge.
62. Deputy Clare Daly asked the Minister for Finance if he will confirm that Section 77 Finance Act (2011) (No 6 of 2011) relating to taxpayer confidentiality, was included following lobbying from the International Financial Services Centre; his views on whether this privacy provision will obstruct necessary oversight of multinational company tax evasion strategies; if he will confirm that this clause does not prevent a case specific application for access to data held by the Revenue Commissioners by the Office of the Director of Corporate Enforcement or Criminal Assets Bureau. [42333/12]
Amharc ar fhreagraThe provisions of section 77 of the Finance Act 2011 (No. 6 of 2011) were proposed by the Revenue Commissioners to my Department and, following consideration by my Department and the Government, were accepted for inclusion in the Finance Bill. The purpose of the provision is to provide a firm legislative basis to the long-standing practice relating to the confidentiality of taxpayer information, both commercial and personal, held by Revenue. It was not introduced as a result of lobbying by either the International Financial Services Centre or any other party. Modern tax administration depends to a large extent on achieving a high level of voluntary compliance by taxpayers, and that in turn depends on a relationship of trust and openness between the taxpayer and Revenue in relation to information that is invariably private and, in the case of businesses, often commercially sensitive. That trust and openness can be undermined in the absence of clear statutory protections. In this regard section 77 provides that taxpayer information may not be disclosed to third parties except in the circumstances specified in section 77 or where it is expressly authorised by another enactment.
Before this provision was enacted, taxpayers relied on the protections in the Official Secrets Act, the Data Protection Acts and the statutory declaration made by Revenue officials in respect of income tax and corporation tax under Schedule D. In the absence of a specific legislative confidentiality provision, the Information Commissioner has commented that to a large extent it seemed that the basis for taxpayer confidentiality was Revenue’s equitable duty of confidence rather than a clear statutory entitlement, which was a matter of concern to the Revenue Commissioners.
The Revenue Commissioners, being highly conscious of the importance of the protection of citizens’ rights in this area, were rightly concerned to ensure that Ireland is in a position to ensure taxpayer confidentiality to the same extent as other jurisdictions. Many other tax administrations have statutory taxpayer confidentiality provisions in place.
Any impression that might be given that Ireland lacked a strong legislative basis for assuring confidentiality for taxpayer information could have adverse implications for the confidence that taxpayers (including foreign direct investors) have in the ability of the Irish tax system to maintain the required level of confidentiality for sensitive personal and commercial information.
Section 77 does not prevent case specific applications for access to data held by the Revenue Commissioners from being made available to the Office of the Director of Corporate Enforcement or the Criminal Assets Bureau for the purposes of the investigation by either of these bodies of a suspected criminal offence. In this regard the taxpayer confidentiality legislation not only sets out particular circumstances in which Revenue may disclose information but also contains provisions that enable the disclosure of information where other statutory provisions provide for this.
Section 77 will not obstruct necessary oversight of multinational companies or any other relevant entities. It complements other statutory provisions enabling information to be exchanged with our Double Taxation Agreement or Tax Information Exchange Agreement partners - which is vitally important to Ireland’s reputation in the international tax arena.
63. Deputy Richard Boyd Barrett asked the Minister for Finance the tax relief for approved retirement funds in respect of earners if more than €80,000 and for earners more than €100,000; and if he will make a statement on the matter. [42351/12]
Amharc ar fhreagraApproved Retirement Funds (ARFs) are personal investment accounts established with retirement benefit funds as an alternative to the purchase of an annuity. Investment income and capital gains, if any, are exempt from tax in the case of Approved Retirement Funds established on or after 6 April 2000. This tax exemption applies regardless of the value of the fund or the income of the ARF owner. Distributions or withdrawals from ARFs are treated as emoluments, subject to tax under Schedule E, so the amount paid will depend on the marginal rate of tax, USC rate and PRSI class applicable to the individual.
64. Deputy Richard Boyd Barrett asked the Minister for Finance the amount of tax relief foregone by the provision for patent income relief; and if he will make a statement on the matter. [42352/12]
Amharc ar fhreagraI am advised by the Revenue Commissioners that the tax relief for patent income and related distributions was abolished in Budget 2011, with effect from 24 November 2010, providing an estimated saving to the Exchequer in a full year of €50 million. The exemption provided under section 234 of the Taxes Consolidation Act 1997 (TCA), applied to income received by an individual or company from a qualifying patent. A qualifying patent was a patent in relation to which the research, planning and development work leading to the patented invention was carried out in the State or in another country that is part of the European Economic Area. The exemption was subject to a limit of €5 million on the aggregate amount of patent income qualifying for relief in any one year. An exemption was also provided, under section 141 of the TCA, for dividends or other distributions paid by companies from tax-exempt patent income.
The decision to abolish the relief was made following consideration of a recommendation to this effect in the Report of the Commission on Taxation. The Commission on Taxation was of the view that the exemption for patent income was not an effective measure in incentivising enterprises to engage in research and development activities in Ireland and that it had been used as a tax-efficient means of remunerating employees and directors.
65. Deputy Richard Boyd Barrett asked the Minister for Finance if he will provide the latest figures in tabular form on the total earnings of the top 10,000 income earners; the top 1% of income earners; the top 5% of income earners; the top 10% of income earners and the top 20% of income earners; the number of earners in those groups; the average earnings of those groups; the total amount of tax on earnings paid by these groups in absolute terms, in percentage terms and in effective tax rate terms and including additional columns showing liability for the universal social charge and the effect of the universal social charge on the total tax take and the effective tax rate. [42353/12]
Amharc ar fhreagraI am advised by the Revenue Commissioners that the relevant information that is readily available at this time, in respect of the top 1%, 5%, 10%, 20% and the top 10,000 income earners, is as estimated by reference to the income tax year 2012 and is set in the following table:
|
Top 1% of income earners |
Top 5% of income earners |
Top 10% of income earners |
Top 20% of income earners |
Top 10,000 income earners |
|
|
Number of income earners |
21,650 |
108,250 |
216,500 |
433,000 |
10,000 |
|
Gross income |
€8,742 m |
€20,122 m |
€29,600 m |
€43,300 m |
€5,959m |
|
Average earnings |
€403,760 |
€185,885 |
€136,710 |
€100,000 |
€595,900 |
|
Amount of income tax, USC & PRSI |
€3,349m |
€7,145m |
€9,849 m |
€13,186 m |
€2,321 m |
|
As % of total Income tax, USC and PRSI |
18% |
39% |
53% |
71% |
13% |
|
Effective tax rate |
38% |
36% |
33% |
30% |
39% |
It should be noted that the figures for tax and effective tax rate include income tax, PRSI and Universal Social Charge (USC). In addition, it was not possible within the time allowed to provide the liability for the USC and the effect of the USC on the total tax take and the effective USC rate.
The figures are estimates from the Revenue tax-forecasting model using actual data for the year 2009 adjusted as necessary for income and employment trends in the interim. These are, therefore, provisional and likely to be revised. In addition, it should be noted that Gross Income is as defined in Revenue Statistical Report 2010.
The numbers of income earners shown in the table counts a married couple who have elected or has been deemed to have elected for joint assessment as one tax unit although USC and PRSI are individualised charges and as such the yield is calculated on the basis of individual incomes.
