Figures released today by the Department of Finance show that 43 high earners had a tax liability of less than 5 per cent in tax in 2002 and that six of these people paid no tax at all.
The study of the top 400 earners for the tax year 2002 show the number paying between zero and 5 per cent in tax rose from 30 in 2001 to 43 in 2002.
The number of taxpayers with an effective rate of less than 15 per cent increased from 55 to 79, and the number of taxpayers with an effective rate of less than 20 per cent increased from 75 to 95.
The Minister for Finance Brian Cowen said the findings underlined the valid reasons for his decisions in Budget 2006 to restrict relief for high earners.
"The measures I took in the 2006 Budget will mean more and more that the tax-take rises from the better off. The new restriction on the use of tax reliefs will ensure that such individuals who use tax incentive schemes will have an effective rate of income tax for each year of not less than about 20 per cent," he said.
The Minister pointed out that in 2002 the top 1 per cent of earners paid 18.6 per cent of all income tax; this year it is expected that those earners will pay over 20 per cent of all income tax.
Workers on the average industrial wage of around €32,000 will pay 6 per cent of all income tax. In 1997 those earning at or under a far lower average industrial wage paid over 14 per cent of all income tax, Mr Cowen said.
Labour Party finance spokeswoman Joan Burton said the number of high earners paying little or no income tax had increased with the help of property tax breaks in particular.
"This means that for many high earners paying tax is an option, not an obligation," Ms Burton said.
Mr Cowen today signed the commencement order phasing out property-based tax breaks.
The tax schemes affected are:
- Urban Renewal scheme
- Rural Renewal scheme
- Town Renewal Scheme
- Relief for hotels and holiday cottages
- Relief for third-level educational buildings
- Relief for park-and-ride facilities and associated developments
- Relief for multi-storey car parks
Mr Cowen announced the end to the breaks in his Budget last December. The reliefs will decline by 25 per cent by the end of July this year, and a further 25 per cent to end July 2007 before being eliminated on 31st July 2008.
The Green Party's Dan Boyle said the "belated" changes in the last Budget would do very little to stop high earners avoiding tax.
"Very little has changed in terms of the tax relief that can be used, the abuse of our tax residency laws and other mechanisms that are available to make Ireland a great country to be ultra rich without having the responsibility of contributing fairly to the costs of meeting this country's needs," said Mr Boyle.
Fine Gael's Richard Bruton said special tax reliefs cost twice as much they returned and said a cost-benefit analysis should be put before the Oireachtas.
Despite the termination of the reliefs, he they will be enjoyed for years to come becuase they are being phased out, Mr Bruton said.
"The total investment to date under these schemes has come to around €4 billion and despite the termination of these schemes, an even larger investment of €6 billion is yet to come."