Tax Changes in Ireland Hit Poorest Taxpayers

February 13, 2012 Taxation in Ireland

Tax Payments Rise for Low Income Earners in IrelandIn 2011 the majority of taxpayers in Ireland saw their tax payments increase compared to 2010, but lowest income earners were the most affected by the changes.

In a new report released on February 12th the Department of Finance analyzed the effect of the government’s austerity package on collections of tax payments in Ireland over the 2011 calendar year.

As part of an ongoing round of austerity measures, on January 1st 2011 the government of Ireland implemented the Universal Social Charge system to replace the country’s income levies and health levy, which is applied at a rate of 7 percent on all personal incomes exceeding EUR 16 016.

According to the Department of Finance, the country’s lowest earning taxpayers were the hardest hit by the change, with individuals earning between EUR 17 542 and EUR 20 000 collectively paying 215 percent more in taxes in 2011 than they did in 2010. Taxpayers with incomes between EUR 20 001 and EUR 30 000 paid 36 percent more in 2011, and taxpayers with incomes between EUR 40 001 and EUR 50 000 were paying approximately 23 percent more.

The newly released information also shows that the 118 taxpayers in the country with incomes exceeding EUR 2 million saw their overall tax payments fall by 0.3 percent in 2011. Local tax experts explained the drop, saying that the decrease in payments is mainly due to a fall in taxable incomes amongst the highest earners. It is estimated that the country’s richest individuals felt their cumulative incomes decrease by EUR 9.2 million over 2011.

Tax experts in Ireland are suggest that the new data shows that the Universal Social Charge system is skewed and tax liabilities in the country fall largely upon the shoulders of the country’s poorest individuals, while the highest earners escape relatively unscathed.

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