The Institute responds to the public consultation on Ireland’s personal tax system

On Wednesday 5 April the Institute, under the auspices of the CCAB-I, responded to the public consultation on Ireland’s personal tax system. In our response we noted that any revision of the personal tax system must take a holistic view of the overall tax mix given Ireland’s personal tax system, though progressive, relies heavily on high-income earners and international workers for a significant portion of its income tax revenues.

In our summary, we noted the following:

• Taxpayers in Ireland face early entry into marginal rate taxation at a threshold which is currently below the average industrial wage.
• The intermediate income tax rate of 30 percent which has been raised in recent months should continue to be considered as part of Ireland’s future tax policy.
• Government should also consider indexation of income tax rates and bands as part of its future tax policy.
• The 3 percent rate of USC on self-employed incomes over €100,000 is inequitable and should be abolished.
• Tax policy must adapt to the modern working arrangements, including hybrid and remote working arrangements.
• SARP should be legislated for on a permanent basis given that it is overall positive from a cost-benefit perspective.
• The Rent Tax Credit should be made a permanent element of the income tax code and a similar credit should be introduced for mortgage holders to ensure parity of treatment.
• The Rent-a-Room threshold should be increased and the “cliff-edge” be removed from the relief.
• The personal tax system should be adapted to address the inequity of corporate landlords receiving more favourable tax treatment for the same source income.
• The government should avoid increasing the administrative burden of the PAYE tax system as onerous administrative requirements are a deterrent to entrepreneurism.
• USC and PRSI should be merged to reduce the overall complexity of the income tax system. Presently, three separate bases for returning tax/contributions on the same or similar income is not ideal from a tax policy perspective. Simplicity and efficiency are pillars of good tax policy.