Should we replace annual allowances with cumulative allowances?

You are confusing a threshold with a tax relief.

A person who starts working at 18, would have to accept a lower personal tax credit to facilitate people who may not start working until they are 25.
 
No. Everyone would have the same, but reduced, personal tax credit of say €1,500 per year.

Let me put it another way.

If you lose your job and earn nothing in 2022, do you think you should pay the same tax in 2023 as someone who had an income in 2022?

Brendan
 
Yes I would, provided I had the same income in 2023.

Irrespective of the amount of the credit, you propose to apply it to people who, currently, have no entitlement to that credit.

When you say it would be cost neutral, how are you estimating the cost?
 
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Sophrosyne said:
When you say it would be cost neutral, how are you estimating the cost?
Click to expand...

I am not. I am setting out the principle.
If the idea is accepted by the government, the Dept. of Finance would have to make the adjustments to make it revenue neutral for the Exchequer.
 
Hi Sop

OK, let's take another approach.

In 2022, I work all year and earn €50,000.
In 2022, you work from January to June and earn €50,000 for those six months and you are unemployed for the rest of the year.

Should we pay the same amount of tax in 2022 or should I pay more or less than you?

Brendan
 
Brendan Burgess said:
I am writing my submission on this.

Are there any other annual allowance which could be extended to a cumulative basis?

My current list is
  • pension contributions
  • income tax credits
  • Small Gifts Exemption for CAT
  • Annual exemption from CGT
Click to expand...
Hi Brendan,

Tbis is a great idea from a taxpayer perspective but I don't see have you can configure this to be tax neutral..

Take the small gift examption of 3k..imagine this gift accumulated for 30 years for your child and you could give them a gift tax free of 180k at age 30 for a house deposit. Now as we all know the first 20 years of a child's life is potentially the most expensive for parents.. Mortgage payments, childcare costs etc, earnings hopefully on an upward trend but money would be very tight and they may not be in a position to give their child 6k per annum for those years. A parent could leave a lifetime inheritance at this stage and legally avoid inheritance tax.
 
Brendan Burgess said:
Hi Sop

OK, let's take another approach.

In 2022, I work all year and earn €50,000.
In 2022, you work from January to June and earn €50,000 for those six months and you are unemployed for the rest of the year.

Should we pay the same amount of tax in 2022 or should I pay more or less than you?

Brendan
Click to expand...

That’s not the same thing.

Tax credits are applied to income earned in a year of assessment.

What you propose is to apply tax credits in a year for which there is no taxable income.

Let’s say you wanted to project how much the Single Personal Tax Credit would cost for 2023.

You would draw on several sources, including Revenue to estimate the number of recipients.

In your scenario, the credit is not a fixed amount, but depends on:

  • whether or not the recipients have a taxable income for the first time in 2023,
  • their date of birth
  • Capturing the number of years from 18 years to 2023
  • the amount of the tax credit for each year from the time they were 18 years to 2023, (when they first acquired a taxable income).
In deciding the amount of the Single Personal Tax Credit each year, cost neutrality would have to form part of the equation.

If you think the Finance Department is going to work that out for you; good luck with that.
 
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