A total of 72 “high income” individuals earning over €125,000 in 2023 would have paid no income tax at all but for special Government measures aimed at limiting higher earners’ use of various tax reliefs.
That is according to a new report by the Revenue Commissioners which shows that 14 “high income individuals” earning over €1m in pay in 2023 paid an additional €6.3m in income tax that year as a result of the tax measures aimed at combating high earners reducing their income tax burden through tax reliefs.
The newly released “Analysis of High-Income Individuals’ Restriction 2023” report shows that the Exchequer received an additional €13.58m in income tax from 127 high income individuals in 2023 as a result of the “restriction” on high earners’ use of tax reliefs aimed at reducing their tax burden.
The 72 high income individuals brought into the income tax net by the tax measures include 27 individuals with an adjusted income of €400,000 or more in 2023 and a further 45 who had an adjusted income between €125,000 and €400,000.
The report states as a result of the restriction on various tax reliefs on those earning over €400,000 it generated an additional €10.7m in income tax representing a 305% increase on the tax that would otherwise have been paid if the restriction had not applied.
The effective tax rate for those earning over €400,000 in pay in 2023 before the “restriction” is taken into account was 17.4% and after the restriction was 29.7%.
After the Universal Social Charge (USC) is included the effective tax rate for that cohort was 39.1%.
The €13.58m paid in additional income tax paid by the 127 high income individuals is €3.69m down on the Revenue receiving an additional €17.27m in income tax from 153 high net worth individuals in 2022.
However, the €13.58m generated in additional income tax in 2023 from the tax measure is only a fraction of the record breaking €80.18m additional tax received from 1,544 individuals in 2010.
The Revenue Commissioners’ report shows that over five years between 2023 and 2019 the “restriction” has generated an additional €90.87m in income tax.
The 12-page report shows that the objective of achieving an effective rate of income tax of approximately 30% for individuals with an adjusted income of €400,000 or more is achieved for 2023.
The report shows that of the 14 individual earnings over €1m in 2023, their income tax bill before the Revenue restriction on the use of tax reliefs would have been €2.2m representing an effective income tax rate of 14.3%.
The report shows that after the restriction was enforced to restrict the use of tax reliefs the amount of tax paid was €8.5m representing an effective income tax of 29.7%.
For those earning €1m in 2023 after including the additional Universal Social Charge, the tax take was €11.2m representing an average effective tax rate of 39.1% for that cohort.
The report states that the reliefs used by the high net worth individuals that are restricted include the various sectoral and area-based property tax incentives; certain exemptions relating to artists’ income and dividends and distributions out of certain exempt income for example; relief for investment on significant buildings and gardens and relief for interest paid on loans used to acquire an interest in a partnership.
Reporting by Gordon Deegan