July 2012        

Tax on millionaires, 2011


A report in the Sunday Independent on 12 February quoted figures on the income tax paid by millionaires in 2011. These estimates were provided by the Department of Finance.
     The article stated that 519 taxpayers earning between €1 and €2 million paid €180 million in tax on a combined income of €677 million. This means that they paid 26 per cent of their income in tax.
     The following would be the deductions if you assume that each of the millionaires is married, with the spouse not working, and if the basic credits and tax rates that apply to most PAYE workers are applied.If it is assumed that they would pay 50 per cent tax, the total take from these millionaires would have been €338.5 million. This is €158.5 million more than they paid.
Income€1,000,000€2,000,000
Deductions (tax, PRSI, USC) less tax credit€505,590.80€1,025,590.80
Deductions as a percentage50.5651.28
     If millionaires paid 50 per cent tax there would be no need to introduce the household charge.
     Why do they pay so little tax? They avail of tax loopholes that allow them to reduce their tax. There is a whole industry of tax advisers who advise wealthy people how to avoid tax.
     They also lobby the Government to introduce laws that reduce their clients’ taxes. Governments have been willing partners in the reduction of taxes for their rich cronies, and in budget after budget they have introduced tax avoidance schemes.
     These schemes are not available to the ordinary PAYE worker.
     In a recent example, Jimmy Carr, an Irish comedian living in Britain, availed of a tax avoidance scam called K2. He set up a company in Jersey, a tax haven. His income was £2 million, on which he paid 1 per cent tax. This is perfectly legal.
     More than a thousand individuals have been beneficiaries of this scam. But British governments have allowed Jersey to operate as an independent tax authority, because it is a dependency of the “Crown” and not technically part of the “United Kingdom.”
     Just as the Irish government has agreements with other tax havens around the world to allow the Irish wealthy elite to pay little or no tax, tax scams are created and allowed by governments.
     The Irish Financial Services Centre in the Dublin docklands is just a glorified tax scam—just as there are people in the office of the Revenue Commissioners whose job it is to look after the transnational corporations based here to minimise their tax liabilities.
[KC]

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