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Irish Think Tank Makes Tax Recommendations

Wednesday, 03 July 2013   (0 Comments)
Posted by: Author: Jason Gorringe
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Author: Jason Gorringe

Social Justice Ireland has said that its proposals for reform of the income tax system would ensure that all earners are treated more equitably.

The think tank has claimed in its Budget 2014 policy briefing report that "austerity is not working for Ireland," and that a new approach is therefore needed.

In particular, Social Justice Ireland recommends the introduction of a maximum effective income tax rate of 45 percent. This would enable the Government "to achieve a more appropriate contribution from the very highest earners in Irish society while also ensuring they don't face a penal effective tax rate."

By contrast, self-employed earners currently face an effective tax rate of 55 percent on all income over EUR100,000 (USD130,000). This rate is made up of 41 percent income tax, 7 percent standard and 3 percent additional Universal Social Charge (USC), and 4 percent pay related social insurance (PRSI). All other individuals in the same pay bracket pay 52 percent, as they are not subject to the 3 percent USC hike.

Social Justice Ireland wants to see the extra USC rate applied to all income above EUR100,000, regardless of its source. The aim here would be to treat the self-employed in the same manner as all other individuals in the taxation system.

For those at the other end of the pay scale, the report calls for the two main tax credits to be made refundable. "This would make Ireland's tax system fairer, address part of the working poor problem and improve the living standards of a substantial number of people." The cost of refunding unused tax credits to around 113,000 eligible individuals would be approximately EUR140m.

On the business front, Social Justice Ireland argues that no corporation should pay less than 6 percent of its profits in tax. Wading in to the ongoing row over Ireland's effective corporate tax rate, it claims that "while many corporate bodies, especially small and medium enterprises struggle to make ends meet and pay 12.5 percent on their profits a small number of huge multinational corporations are able to pay very low effective tax rates on huge profits." By applying a minimum 6 percent rate on all corporate profits, Social Justice Ireland calculates that the Government could raise extra revenue of at least EUR1.1bn in a full year.

Another suggestion likely to generate controversy is the report's contention that Budget 2014 should commit Ireland to adopting the European Commission's much maligned financial transactions tax (FTT). For Social Justice Ireland, "the tax offers the dual benefit of dampening needless and often reckless financial speculation and generating significant funds." The money raised "should be used for national economic and social development and international development co-operation purposes, in particular financing Ireland and other developed countries to fund overseas aid and reach the United Nations' Official Development Assistance target."



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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