Give over with the ‘giveaways’ and index-link our tax system
Jaw-dropping Revenue report exposes just how much State grabs in stealth taxes – but don’t worry, help is here
Have you been feeling worse off year after year despite what the Government claims are ‘giveaway budgets’? Well, you might be right. A new report exposes how the true toll of taxation is getting worse – and not better as the Government would have us believe. The State raked in nearly €28bn from income tax and USC on workers last year, nearly THREE TIMES more than in 2000, the Ireland Tax Statistics Report 2021 shows.
Our tax burden has been creeping up with a multitude of sneaky stealth taxes including the failure to increase tax bands, credits and allowances in line with inflation. Many countries do this automatically to avoid politicians falsely claiming sub-inflation increases as giveaways like ours tend to do.
Call that a bonanza?!
This might help explain how, after years of claimed budgetary ‘bonanzas’, the State raked in €93bn in tax revenue from us last year – an eye-watering 21% more than in 2020.
Much of that was due to the economy kicking back into action after pandemic lockdowns. But the increase is still well over twice the record inflation rate.
Ever-rising taxes are a long-term trend that has nothing to do with Covid-19. What were repeatedly dubbed ‘giveaway budgets’ were really TAKEAWAY budgets, the CSO report reveals.
For example, it would take around €2bn to properly index tax bands, credits and allowances to inflation.
But Finance Minister Paschal Donohoe allocated little over half that sum in the Budget for the tax system.
Then, pretending 9% inflation doesn’t exist, he trumpeted his €1bn allocation as a bonus – when he was really making us nearly €1bn poorer!
There have been pledges to indexlink our tax systems for decades.
Last June even Minister Donohoe said it needed to be done.
But as Budget day approached, he shut up about it and did nothing whatsoever in October.
Pulling the wool over our eyes in this way is simply too easy and lucrative a moneyspinner to stop.
Another reason we keep paying more tax is that the most painful emergency ‘temporary’ tax-raising measures – like the Universal Social Charge – are NEVER truly abolished, despite repeated promises to do so from Fine Gael, in particular.
Battered by levies
Taxes called levies hit our gross income, cutting through all the credits and allowances that build fairness into the system.
That’s why politicos love them. They’re like a drug they cannot wean themselves off, however much they promise to and no matter how temporary they were meant to be.
The health levy – which dates back to the Eighties – was brought in as a stopgap emergency measure to fund the health service.
By 1995 it was bringing in €272m – but by 2010 that was up more than seven-fold to over €2bn.
And no sooner was it done away with than it was replaced by the USC which took in twice as much again – around €2,000 on average from every worker – see table, right. That started off taking in €4,196m a year – but despite numerous ‘reductions’ and pledges to abolish it, it now brings in even more! An eye-watering €4.411m to be exact.
Many other tax hikes imposed during the austerity era as ‘temporary’ are still with us.
‘For example, the amount of tax relief you can claim on medical expenses was halved during the austerity years and that has never been reversed… The tax relief on bin charges and trade union subscriptions is also gone,’ Taxback. com says.
10 ways to stake your claim
Tax isn’t all one-way traffic. Up to €300m was overpaid by taxpayers in 2020, Taxback.com adds. And a chunk of that sum could be YOUR money. The average refund for people who claim a rebate is €1,880 – up from €1,076 in previous years.
But the Revenue won’t just hand you back the money – you have to know what to ask for. Here are 10 tips to do just that:
1. Keep receipts, especially for medical bills and work-related expenses. Up to half of overpaid taxes are due to people not claiming for medical expenses. We can claim for going to the doctor, dentist and even for special foods or supplements if prescribed by a doctor.
2. Check if you’re eligible for the €1,600 home-carer tax credit. You can apply if you are married or in a civil partnership and care for a dependent person.
3. Claim relief on tuition fees for approved third-level education courses – for either yourself or a student.
4. Flat-rate expenses can be claimed by PAYE workers without any fuss or receipts. Revenue has a list of what sum applies to what job – which seems a bit random and even discriminatory. Consider the paltry €85 a year for fitters and mechanics who ‘bear the full cost of their own tools and uniforms’ against the €2,476 for RTÉ concert orchestra musicians (see Revenue’s myAccount service).
5. Reliefs are basically tax breaks. And they can be claimed for a wide range of stuff, including working from home, nursing home, rent, employing a home carer and home renovation.
6. The Irish tax system greatly favours married couples over single people so if you’re recently married take full advantage.
‘If you’re earning a lot more than your spouse and/or your spouse isn’t using up all of their tax credits, you can transfer some of your spouse’s credits over to you to reduce your overall tax liability as a couple,’ advises Daragh Cassidy of Bonkers.ie
7. Putting money into your pension is the biggest taxsaver around as you can still write it off at the top rate of tax. The only caveat is that you might have to pay tax on your pension income when you draw it down again, although older people can earn more money tax free.
8. With the rent-a-room scheme you can earn up to €14,000 a year entirely tax free by renting out a spare room in your home. This is a phenomenal tax break.
9. Get on your bike. ‘Under the Cycle-to-Work Scheme your employer pays for a bike or bike equipment for you, which you then pay back through your salary over a period of up to 12 months. You won’t have to pay any income tax, PRSI or Universal Social Charge on your repayments,’ explains Mr Cassidy. The limit is €1,250 per bike (€1,500 for electric bikes).
10. The Taxsaver scheme does the same thing – but with bus or train tickets. Your employer pays for your ticket and you pay back through your salary each month, writing the money off against tax, which means big savings!
Check Revenue.ie for further details.