Jill Kerby

ARE WE ALL INCOME TAXED-OUT?  NOT A CHANCE

In just two more weeks we will find out just how much more tax we’ll be paying in 2014.

The expected €500 million, in addition to the €600 million that was already identified in last years Budget for collection in 2014 will mean that at least €1.1 billion euro will leave our collective pockets into those of the Irish state.

That leaves perhaps as much as another €2 billion that will have to be found from spending cuts (assuming the entire €3.1 billion worth of cuts expected by the Troika is implemented and not the €2.8 billion some members of the government argued would be sufficient to meet our debt to GDP targets.)

Every year the Irish Taxation Institute holds a media briefing and speculates on where those extra taxes may be harvested. First, they identified the areas from which the €600m extra tax, announced in the 2013 Budget for payment in 2014: 

-       €250 million from full payment Local Property Tax;

-       €250 million as a result of personal pension funding changes;

-       €16 million in carbon tax increases;

-       €12 million capital acquisition tax (CAT) increases;

-       €14 million DIRT tax increases

-       €58 million

The Taxation Institution suggested that the extra €500 million might be raised from:

-       Fiddling with the tax bands and lowering the 52% higher entry point below the current €32,800 earnings.

-       Increasing PRSI for the self-employed by 1.5% and extending 4% PRSI to all deposit interest earned and not just that earned by the self-employed.  

-       Increasing both capital gains and gift/inheritance taxes from current rates of 33%.

-       Increasing the DIRT rate (now €33%).

-       Further tightening of funding and income limits for personal pensions.

-       A return to 13.5% VAT for the hospitality/hairdressing industry (now 9%).

-       Increasing VAT (now 23%) and/or inclusion of more zero-rated goods in VAT regime.

-       Increasing excise duty for petrol, fuel, alcohol and tobacco.

-       Higher VRT on new vehicles.

The Taxation Institute did us a greater service in their briefing last week by putting in context the amount of tax ordinary workers (as opposed to large foreign companies) are now paying.

In 2007, at the height of the boom, a single person earning €30,000 paid 12.9% of their gross earnings or €3,870 in taxes/PRSI, etc leaving them with €29,030. Six years later that person is paying nearly 17.7% of their income (4.2% more) in tax, PRSI and USC leaving them with €24,690.

Even a married couple with one income of €60,000 and two children is now paying 26.6% more or €15,960, in extra tax than in 2007, when they paid 212,480 or 20.8%. Six years ago this amounted to just €12,480.

Even worse is that is that in Ireland we enter marginal, or highest income taxes (that include PRSI, USC, etc) with extremely lowest amounts of income:  all earnings over €32,800 since 2012 are subject to 52% marginal taxes now. In the likes of the Netherlands, the highest tax (49.3%) kicks in at €55,045; in the UK (52%, coming down to 47%) €183,285. In France the equivalent marginal rate is 52% but you need to earn over €186,749; in Germany it is 47.5% tax after earning €259,103 and in the USA, €301,163 in the US in 2012 the 43.9% was paid on income over €301,163.

Only the Scandinavians pay marginal tax rates at income entry levels as low as ours (and deliver abundant cradle to grave services with low debt ratios and high employment. None of them are members of the eurozone.) 

In 2013, 42% of all tax raised by the state will come from income tax. In 2007 just 29% of all taxes were from income sources and there were 300,000 more people in the workforce. In 2015 another €2.5 billion will have to be taking out of the Irish government spending budget and a significant proportion will have to be made up from taxation.

If you are working, it is important that you review your income, make sure you are not overpaying existing taxes and try to further reduce your expenditure.

On that note, starting next Thursday in Wexford at the Ferrycarrig Inn at 8pm, my year-long Mother & Daughter Personal Finance Tour of free seminars, in association with the Irish Countrywomen’s Association and our sponsor, healthcare insurer, HSF will resume.  The other dates are budget-eve, October 14, in Castlebar; October 24 in Monaghan town and November 5 in Carlow. See www.ICA.ie  for more details or my website, www.jillkerby.ie )

I’ll be looking at the upcoming Budget and its promise of higher taxes and many other money topics of interest for women of all ages, like bank savings, debt and insolvency, the cost of health care, insurance, retirement savings, inheritance and how to Build An Ark – a financial ark - for your family and loved ones.

You’re going to need one.