Who pays income tax in Ireland?

A total of 2,261,236 individuals were liable for income tax in Ireland in 2006 – a time of full employment when the labour force had reached a record high. 41% of these people, 926,100  earned less than €20,000 and were liable for very little income tax.  214 individuals earned more than €500,000 and they paid over €34 million in income tax.  85 individuals earned over €1 million and 25 of these earned over €2 million in 2006.

Income tax accounted for 27% of the overall taxation revenue of the Irish Government in 2006.  Curiously, the projected yield from income tax this year, €12.47 billion, is slightly ahead of the 2006 return – despite there being 418,000 on the Live Register compared to 155,000 in 2006.

The total gross income (before adjustments and allowances) in 2006 of 2,261,136 earners was €81,517,980,000 (€81.5 billion) on which income tax of €11,976,340,000 was charged.  Allowances, deductions, reliefs and exemptions reduced the gross income figure to €76,494,900,000.  Tax credits amounted to €8,537,700,000.  The average tax wedge on gross income was 14.7% and on taxable income 15.7%.  Gross individual income represented 46% of Gross Domestic Product in 2006.

The ‘Schedule E’ - (PAYE component) of gross income was €66,956,400,000 and the public sector element of this in 2006 was €16.71 billion – 25% of the total salary and waged component.

The following table summarises the demographic profile of taxpayers

Category	Number of taxpayers	€ Gross Income	€ Tax
Single males	774,968	19,763,200,000	2,735,810,000
Single females	665,682	14,801,160,000	1,745,000,000
Married, both earning	391,212	29,174,110,000	4,860,930,000
Married, one earning	354,072	15,720,150,000	2,416,630,000
Widowers	19,101	669,420,000	94,240,000
Widows	56,101	€1,389,950,000	€123,740,000
TOTAL	2,261,136	81,517,990,000	11,976,350,000

904,944 taxpayers are exempted from income tax on grounds of low income or having sufficient credits, reliefs and allowances. 

957,233 taxpayers pay income tax at the 20% rate.  Their average income is €32,446 per annum and their tax wedge is 8.8%

The balance, 398,969 taxpayers, pay tax at the 42% rate and their average income in 2006 was €89,477 per annum.

The latter group represent middle-income earners and they suffer a a higher tax wedge – summarised for each category as follows:

 

Middle Income Earners

	Average Income	Tax Wedge
Single males	€66,379	25.6%
Single females	€58,979	24.2%
Married, both earning	€120,607	25.1%
Married, one earning	€111,208	27.3%
Widowers	€75,285	25.1%
Widows	€67,743	23.5%

Lower Income Earners

Some 41% of Irish taxpayers, 926,100 persons earned less than €20,000 in 2006 – most of which was not liable to any income tax.

Higher Income Earners

I classify 88,214 persons (less than 4% of all taxpayers) who earned €100,000, or more, in this category.  An elite cohort of 8,905 earned more than €275,000.  But some of these earned significantly more as the average earnings of this subset were €665,678.

Tax Restrictions on High Income Earners’

Regulations under the Finance Acts of 2006 and 2007 introduced, with effect from 1 January 2007, measures to limit the use of certain tax reliefs and exemptions by high-income earners.

This applies to incomes in excess of €500,000 per annum and they are required to pay an effective tax rate of approximately 20% on what is defined as a combination of adjusted income and ring-fenced income.

There were 214 Irish taxpayers with incomes in excess of €500,000 in 2007 and they paid an effective tax rate of 20.8% on this income.  The Revenue Commissioners collected €34.15 million as a consequence.

The type of reliefs that these individuals traditionally availed of include reliefs applying to artists and patent income.

The range of income and the number of taxpayers effected is as follows:

 

Adjusted Income €	Number of taxpayers
500,001 to 650,000	55
650,001 to 800,000	39
800,001 to 1,000,000	35
1,000,001 to 1,500,000	48
1,500,001 to 2,000,000	12
2,000,000+	25