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Dublin: 4 °C Tuesday 19 November, 2019
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Would the Government's proposed tax cut actually help people?

A new research paper claims that the only beneficiaries would be those who earn a lot already.

Image: AP/Press Association Images

A NEW PAPER from economic think-tank TASC has thrown doubt on whether a change to the top rate of income tax would leave the average person with more money in their pocket.

One of the main measures being floated by the Government is an increase in the level at which people start paying the higher 41% tax rate, currently  €32,800.

The paper argues that due to tax credits, reliefs and breaks available and low levels of PRSI, actual tax rates are significantly lower than the headline tax rates.

It posits that the a person on €37,500 per year in fact pays 21.6% in income tax, rather than the headline rate of 52%, which is combined of income tax, PRSI and Universal Social Charge.

The authors point to data from the last census which shows that of the 1.9 million people working at the moment, the majority earn less than €35,000 per year, only just above the point at which the higher rate of tax kicks in.

It argues: “The vast majority of these people will not benefit to any changes to the top rate of tax.”

Revenue data show that 65% of earners do not pay anything at the higher rate of tax, and 85% pay less than a quarter of their gross income at the higher rate.

The report states that:

Rather than benefiting ‘middle income earners’…raising the onset of the higher rate of income tax, or changing the income tax bands, would disproportionately benefit higher earners.

It goes on to claim that “the proposed beneficiaries of any changes to the higher rate of income tax are few in number and are those who already gain most from Ireland’s economic system”.

What do you think? Would you benefit from the Government’s planned tax cuts or is it just paying lip service?

Read: Self-employed contractors are underpaying millions in tax>

Read: Revenue collected €23 million from tax defaulters in the first three months of 2013>

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About the author:

Jack Horgan-Jones

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