Independent Article on the effective tax rate

[ctlsleh]

http://www.independent.ie/business/...ach-this-year-and-paid-151m-tax-29814408.html

Anyone know how these effective tax rates are calculated? i am a reasonably high earner ill admit at between 100-200K (PAYE) however im paying about 50% of my gross pay in tax, where this article suggests i should be only paying in the region of 25-28%......what am i doing wrong?

 

[1dave123]

Effective tax rate is simply the sum total of all the income tax you paid in a period divided by your gross pay for the same period. Ignore USC and PRSI.

Your marginal rate of tax is 41%. However your effective rate of tax will be lower than this because some of your pay will have been taxed at 20% and most likely you will have some tax free allowances as well. The Revenue Form P21 usually shows your effective rate of tax at the bottom of page 2.

A Form P21 is the balancing statement the Revenue send u when when u have submitted your tax return.

 

[newirishman]

What you are doing wrong is earning too much money.
Look at the stuff further down:

The largest cohort of taxpayers consists of those earning between €20,000 and €30,000, with 398,715 taxpayers in this bracket. They will generate €9.8bn and pay €376m in income tax on a rate of 3.8pc.
The figures show 302,643 will earn between €30,000 and €40,000, generating a gross income of €10.52bn and paying €761m in tax on rates of 7.2pc.

An effective tax rate of just 3.8pc and 7.2pc for those incomes that hover around the avg industrial wage is astonishing.
Take further into account that Ireland does not charge VAT on most food stuff.
Doesn't mean that Ireland doesn't have a high cost of living put it doesn't seem to be the fault of the tax man....

 

[ctlsleh]

Effective tax rate is simply the sum total of all the income tax you paid in a period divided by your gross pay for the same period. Ignore USC and PRSI.

Your marginal rate of tax is 41%. However your effective rate of tax will be lower than this because some of your pay will have been taxed at 20% and most likely you will have some tax free allowances as well. The Revenue Form P21 usually shows your effective rate of tax at the bottom of page 2.

A Form P21 is the balancing statement the Revenue send u when when u have submitted your tax return.

thanks dave123

 

[DerKaiser]

Spot on from Dave123.

As an example, if you are earning 150,000 you will pay an effective income tax rate of 34% (Lower than 41%, reflecting the portion of your wage under €32,800 is taxed at a lower rate).

In addition, you will pay just under 11% in PRSI / USC. So 34% really means 45%.

The only question might be how you would get the 34% below 30% as per the aggregate figures. The most obvious way for a regular PRSI worker would be to contibute to a pension. If you put in 30% of gross salary (€30,000), you would reduce your tax bill by about €12k and your tax rate would fall from 34% to 26%.

 

[jpd]

In the interest of clarity and completeness, the full table referred to by Minister Noonan was

Gross Income Range € Gross Income € Number in group Cumulative Numbers Cumulative % Income Tax € Average Income € Average Tax € Tas as % of Income
10,000 or less

1,701,125,991​

386,113​

386,113​

18%​

413,033​

4,406​

1​

0.0%​

10,001 – 20,000

5,991,247,957​

394,547​

780,660​

36%​

40,310,708​

15,185​

102​

0.7%​

20,001 – 30,000

9,894,189,836​

398,715​

1,179,375​

54%​

376,689,221​

24,815​

945​

3.8%

30,001 – 40,000​

10,526,536,676​

302,643​

1,482,018​

68%​

761,371,741​

34,782​

2,516​

7.2%


40,001 – 50,000​

9,188,240,949​

205,698​

1,687,716​

78%​

1,014,747,279​

44,669​

5,064​

11.3%

50,001 – 60,000​

7,439,955,833​

136,170​

1,823,886​

84%​

1,058,209,385​

54,637​

7,771​

14.2%

60,001 – 70,000​

6,111,257,479​

94,391​

1,918,277​

89%​

968,351,805​

64,744​

10,259​

15.8%

70,001 – 80,000​

4,885,203,793​

65,408​

1,983,685​

92%​

858,055,522​

74,688​

13,119​

17.6%

80,001 – 90,000​

3,791,883,977​

44,761​

2,028,446​

94%​

726,494,017​

84,714​

16,231​

19.2%

90,001 – 100,000​

2,974,203,171​

31,396​

2,059,842​

95%​

611,283,510​

94,732​

19,470​

20.6%

100,001 – 125,000​

2,866,266,063​

21,073​

2,126,768​

98%​

701,259,789​

136,016​

33,278​

24.5%

150,001 – 175,000​

1,871,791,838​

11,601​

2,138,369​

99%​

482,446,104​

161,347​

41,587​

25.8%

175,001 – 200,000​

1,295,536,585​

6,944​

2,145,313​

99%​

344,645,246​

186,569​

49,632​

26.6%

200,001 – 250,000​

1,714,547,953​

7,718​

2,153,031​

99%​

469,551,354​

222,149​

60,383​

27.4%

250,001 – 300,000​

1,155,249,712​

4,327​

2,157,358​

100%​

324,876,900​

272,657​

76,676​

28.1%

300,001 - 350,000​

815,682,198​

2,530​

2,159,888​

100%​

235,605,616​

322,404​

93,125​

28.9%

350,001 – 400,000​

591,932,771​

1,585​

2,161,473​

100%​

171,761,138​

373,459​

108,369​

29.0%

400,001 – 450,000​

436,035,890​

1,028​

2,162,501​

100%​

132,133,368​

424,159​

128,534​

30.3%

450,001 – 500,000​

352,328,419​

743​

2,163,244​

100%​

107,279,137​

474,197​

144,386​

30.4%

500,001 – 750,000​

1,157,652,860​

1,927​

2,165,171​

100%​

350,608,421​

600,754​

181,945​

30.3%


750,001 – 1,000,000​

554,709,996​

648​

2,165,819​

100%​

165,893,488​

856,034​

256,008​

29.3%

1,000,001 – 2,000,000​

733,261,467​

549​

2,166,368​

100%​

214,029,105​

1,335,631​

389,853​

29.2%

Over 2,000,000​

527,352,863​

130​

2,166,498​

100%​

150,954,072​

4,056,560​

1,161,185​

28.6%

Overall Total​

81,659,329​

2,166,411​

.​

100%​

11,434,414,947​

37,693​

5,278​

14.0%​

 

[jpd]

An income of € 75,000 or more puts you in top 10% of income earners

54% earn 30,000 or less!

Not sure why the total number is not equal to cumulative but presumably rounding error have crept in somewhere to the figures published

Also paeto's principle is validated - 80% contribute 20% of tax take and 20% contribute 80% of tax

 

[Joe_90]

It has to be bourne in mind that above €1,000,000 the effective tax rate is 40%.

So it appears that all have a method of reducing their rate by 10% which is a lot lower than it was before the introduction of the high earners restriction.

The headline is incorrect in the sense that the table refers to 130 people earning over €2 million with an average of €4 million.