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101-464: Taxation in Ireland in 2017 came from Personal Income taxes (40% of Exchequer Tax Revenues , or ETR), and Consumption taxes , being VAT (27% of ETR) and Excise and Customs duties (12% of ETR). Corporation taxes (16% of ETR) represents most of the balance (to 95% of ETR), but Ireland's Corporate Tax System (CT) is a central part of Ireland's economic model. Ireland summarises its taxation policy using

202-599: A credit for income taxes paid to other jurisdictions of the same sort. Thus, a credit is allowed at the national level for income taxes paid to other countries. Many income tax systems permit other credits of various sorts, and such credits are often unique to the jurisdiction. Some jurisdictions, particularly the United States and many of its states and Switzerland , impose the higher of regular income tax or an alternative tax. Switzerland and U.S. states generally impose such tax only on corporations and base it on capital or

303-473: A change in price would not have a large effect on the quantity of beachfront hotels. These examples are illustrated graphically (right). The economic incidence on consumers is equal to P c − P ∗ {\displaystyle P_{c}-P^{*}} , and the incidence on producers is equal to P ∗ − P s {\displaystyle P^{*}-P_{s}} . Full shifting of

404-465: A concept of net increase. In 9 CE, Emperor Wang Mang of the Xin dynasty (9 to 23 CE) established the first income tax through a 10% tax of net earnings from wild herb and fruit collection, fishing, shepherding, and various nonagricultural activities and forms of trading. People were obligated to report their taxes to the government and officials would audit these reports. The penalty for evading this tax

505-548: A few countries, cities also impose income taxes. The system may be integrated (as in Germany) with taxes collected at the federal level. In Quebec and the United States, federal and state systems are independently administered and have differences in determination of taxable income. Retirement oriented taxes, such as Social Security or national insurance , also are a type of income tax, though not generally referred to as such. In

606-446: A further tax credit, which is normally paid in full to the insurance company to offset the considerably higher cost incurred by insurers in respect of members over 50. Tax relief is available on medical expenses. With the exception of fees paid to approved nursing homes, the relief is only available retrospectively (i.e. by completing a tax return at the end of the year), and the relief is awarded at 20% since 2009. It can be claimed for

707-439: A levy of 2 old pence in the pound ( 1 ⁄ 120 ) on incomes over £60 (equivalent to £6,700 in 2023), and increased up to a maximum of 2 shillings in the pound (10%) on incomes of over £200. Pitt hoped that the new income tax would raise £10 million a year, but actual receipts for 1799 totalled only a little over £6 million. Pitt's income tax was levied from 1799 to 1802, when it was abolished by Henry Addington during

808-521: A married couple to €70,600, little less than twice the single person's band. The increase is not transferable between spouses. A taxpayer's tax liability is reduced by the amount of their tax credits, which replaced tax-free allowances in 2001. Tax credits are not refundable in the event that they exceed the amount of tax due, but may be carried forward within a year. A wide range of tax credits are available. A few are awarded automatically, while others must be claimed by taxpayers. The principal tax credit

909-501: A new source of funds. The new income tax, based on Addington's model, was imposed on incomes above £150 (equivalent to £19,487 in 2023). Although this measure was initially intended to be temporary, it soon became a fixture of the British taxation system. A committee was formed in 1851 under Joseph Hume to investigate the matter, but failed to reach a clear recommendation. Despite the vociferous objection, William Gladstone , Chancellor of

1010-574: A person had in property, the more tax they paid. Taxes were collected from individuals. One of the first recorded taxes on income was the Saladin tithe introduced by Henry II in 1188 to raise money for the Third Crusade . The tithe demanded that each layperson in England and Wales be taxed one tenth of their personal income and moveable property. In 1641, Portugal introduced a personal income tax called

1111-433: A person's own expenses, or expenses which they pay on behalf of a relative, dependant, or, since 2007, anyone at all. Medical expenses are construed widely, and include: The relief can be claimed in the year when the cost was incurred or in the year when the payment was made. A person may deduct from his income for the purposes of tax calculation up to 10% of that income which is spent on permanent health insurance. Relief

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1212-613: A product. Following the Law of Supply and Demand , as the price to consumers increases, and the price received by suppliers decreases, the quantity that each wishes to trade will decrease. After a tax is introduced, a new equilibrium is reached, where consumers pay more ( P ∗ → P c ) {\displaystyle (P^{*}\rightarrow P_{c})} , suppliers receive less ( P ∗ → P s ) {\displaystyle (P^{*}\rightarrow P_{s})} , and

1313-412: A residential system of taxation usually allow deductions or credits for the tax that residents already pay to other countries on their foreign income. Many countries also sign tax treaties with each other to eliminate or reduce double taxation . Countries do not necessarily use the same system of taxation for individuals and corporations. For example, France uses a residential system for individuals but

1414-426: A similar measure. Income tax is generally collected in one of two ways: through withholding of tax at source and/or through payments directly by taxpayers. Nearly all jurisdictions require those paying employees or nonresidents to withhold income tax from such payments. The amount to be withheld is a fixed percentage where the tax itself is at a fixed rate. Alternatively, the amount to be withheld may be determined by

1515-410: A tax actually represents the amount of deadweight loss created by the tax. Deadweight loss is the reduction in social efficiency ( producer and consumer surplus ) from preventing trades for which benefits exceed costs. Deadweight loss occurs with a tax because a higher price for consumers, and a lower price received by suppliers, reduces the quantity of the good sold. Thus, the equilibrium quantity of

1616-612: A tax haven . In June 2017, Ireland's CT system was ranked as one of the world's largest Conduit offshore financial centers (OFCs) (i.e. places that act as links to tax havens), in March 2018 the Financial Stability Forum ranked Ireland as the 3rd largest Shadow Banking OFC , and in June 2018 tax academics calculated that Ireland was the world's largest corporate tax haven . Ireland's Property taxes (Stamp duty and LPT) are in line with

1717-490: A tax haven for foreign multinationals to avoid global taxes contrasts with the fact that Ireland's overall tax receipts are in line with the EU and OECD averages (when properly adjusted using Irish GNI*, and not the distorted Irish GDP). Income tax is charged in respect of all property, profits, or gains. Since 2002, Ireland has operated a tax year coinciding with the calendar year (1 January to 31 December). The change coincided with

1818-464: A tax occurs when one party in a transaction bears all of the tax burden. When demand is perfectly inelastic, the tax burden is fully shifted onto consumers; when supply is perfectly inelastic, the tax burden is fully shifted onto producers. In the long run, however, supply and demand both become more elastic: consumers' preferences for a product can change (cigarette smokers can quit smoking), and suppliers can choose to reduce their investment in, or leave,

1919-409: A tax. For example, if a person directly pays his or her income tax to the government (with no employer withholding), the statutory burden would fall on consumers. If a tax is imposed on the producers of gasoline, however, the statutory burden would fall on producers. The economic incidence of a tax falls on the party that bears the actual cost of the tax. Put another way, economic incidence reflects

2020-406: A taxed good is lower than the equilibrium quantity when the same good is not taxed. The deadweight loss created by the tax is equal to 1 2 ×   T a x   × ( Q ∗ − Q t ) {\displaystyle {1 \over 2}\times \ Tax\ \times (Q^{*}-Q_{t})} , represented by the shaded triangle in

2121-456: A territorial system for corporations, while Singapore does the opposite, and Brunei taxes corporate but not personal income. Public disclosure of personal income tax filings occurs in Finland , Norway and Sweden (as of the late-2000s and early 2010s). In Sweden this information has been published in the annual directory Taxeringskalendern since 1905. Tax wedge The tax wedge

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2222-506: Is domiciled in Ireland if born in Ireland; a person who has "demonstrated a positive intention of permanent residence in [a] new country" ceases to be domiciled in Ireland. A person who is not an Irish resident but is ordinarily resident in Ireland is liable to tax on all Irish and foreign-sourced income in full, except for income from a trade, profession, office, or employment, the duties of which are entirely exercised outside Ireland, and on foreign income under €3,810 per year. A person who

2323-478: Is a central part of Ireland's economic model. Not only do foreign multinationals pay 80% of Ireland's corporation tax, but they also directly employ 10% of the Irish labour force, rising to 23% when Public Sector, agri and finance jobs are excluded and pay 50% of all Irish salary taxes using the same metric; in 2016, they were 57% of all Irish non-farm OECD value-add (see multinational economy ). A source of controversy

2424-430: Is a very wide variation in the amount of taxation in different countries. For example, countries such as Singapore, Belgium and United Arab Emirates levy low income tax on interest and dividends, while countries such as Denmark, France and United States have very high income tax for this type of income. For profits that are earned by selling assets or a real estate (capital gains), the income tax varies between countries, and

2525-415: Is allowed in arrears – credit for payments made in 2007 is given in 2008 – and is given at 20%, to a maximum of €80 (where €400 or more was paid for service charges). It will cease from 2011. Tax relief at 20% is allowed in respect of tuition fees paid for third-level courses, excluding the first €2,500 for a full-time course and €1,250 for a part-time course, of the course fees). The maximum relief available

2626-532: Is also allowed in respect of fees of over €315 for foreign-language or information technology courses approved by FÁS , of less than two years duration, which results in the award of a certificate of competence. The relief is for 20% of the amount paid, to a maximum of €254 (20% of €1,270) per course. It is not available for courses in the Irish or English languages. Income tax The tax rate may increase as taxable income increases (referred to as graduated or progressive tax rates). The tax imposed on companies

2727-483: Is awarded to employees and others who pay tax under the Pay as you earn system (further details below), to compensate them for the time value of money effect; their tax is deducted from their incomes during the year, whereas the self-employed pay near the end of the year. The credit may not exceed 20% of the recipient's income during the year and it is not transferable between spouses. A person resident and domiciled in Ireland

2828-507: Is back to 33%, in line with the OECD average. In 2017, Eurostat noted that Irish GNI* still contained BEPS tool distortions, and thus the Irish Tax-to-GNI* ratio is understated . The OECD's 2018 Taxing Wages shows Ireland's tax wedge for labour income , which is the total tax (PAYE and EE and ER–PRSI less SS Benefits) paid on Irish wages by both the employee and employer, as a % of

2929-423: Is different from for any other types of income. Rental income may also sometimes be subject to income tax, but many countries offer deductions or even exemptions for this type of income. Income taxes are used in most countries around the world. The tax systems vary greatly and can consist of a flat fixed rate , progressive , or regressive , structures depending on the type of tax. Comparison of tax rates around

3030-486: Is higher in the US than in countries like Germany or Italy. In countries with a sizeable black market , the voluntary compliance rate is very low and may be impossible to properly calculate. Income taxes are separately imposed by sub-national jurisdictions in several countries with federal systems. These include Canada , Germany , Switzerland, and the United States , where provinces, cantons, or states impose separate taxes. In

3131-465: Is in line with EU VAT rates (see graphic). The OCED Revenue Statistics 2017 – Ireland , ranks Ireland as being below the OECD average for effective VAT (22nd–lowest out of 35 OECD countries), but in line with the OECD average for overall Consumption taxes (e.g. VAT and Excise combined), ranking 16th of out 35 OECD countries. In October 2013, the Department of Finance Tax Policy Group , highlighted that

Taxation in the Republic of Ireland - Misplaced Pages Continue

3232-828: Is included in income for individuals may differ from what is included for entities. The timing of recognizing income may differ by type of taxpayer or type of income. Income generally includes most types of receipts that enrich the taxpayer, including compensation for services, gain from sale of goods or other property, interest, dividends, rents, royalties, annuities, pensions, and all manner of other items. Many systems exclude from income part or all of superannuation or other national retirement plan payments. Most tax systems exclude from income health care benefits provided by employers or under national insurance systems. Nearly all income tax systems permit residents to reduce gross income by business and some other types of deductions. By contrast, nonresidents are generally subject to income tax on

3333-434: Is known as marginal relief . In this case, income over the exemption limit is charged to tax at a flat rate of 40%. A person or couple may choose to be taxed under marginal relief or the regular tax system, and will be granted whichever system is more beneficial, including retroactively. Some items of expenditure can be deducted from a person's income for tax purposes, generally referred to as getting tax relief. In some cases

3434-432: Is liable to Irish income tax on their total income from all sources worldwide. In this sense, a person who spends: is considered to be resident. Presence in Ireland of not more than 30 days in a tax year is ignored for the purposes of the two year test. Since 1 January 2009, a person is treated as present in Ireland for a day if present at any time during the day; before this, a person was only treated as present if he or she

3535-529: Is nearly always allowed for recovery of costs of assets used in the activity. Rules on capital allowances vary widely, and often permit recovery of costs more quickly than ratably over the life of the asset. Most systems allow individuals some sort of notional deductions or an amount subject to zero tax. In addition, many systems allow deduction of some types of personal expenses, such as home mortgage interest or medical expenses. Only net income from business activities, whether conducted by individuals or entities

3636-473: Is only one tax bracket, or one remains within the same tax bracket, there will still be bracket creep resulting in a higher proportion of income being paid in tax. That is, although the marginal tax rate remains unchanged with inflation, the average tax rate will increase. Most progressive tax systems are not adjusted for inflation. As wages and salaries rise in nominal terms under the influence of inflation they become more highly taxed, even though in real terms

3737-461: Is resident in Ireland, and is either ordinarily resident or domiciled in Ireland, but not both, is liable to tax on all Irish income in full, and on such foreign income as is remitted to Ireland. A person who is neither resident, ordinarily resident, nor domiciled in Ireland is taxable on all Irish sourced income in full, and on foreign sourced income in respect of a trade, profession, or employment exercised in Ireland. A person aged 65 or over during

3838-648: Is tax resident and also pay tax to other country where he or she is non-resident. This creates the situation of Double taxation which needs assessment of Double Taxation Avoidance Agreement entered by the jurisdictions where the tax payer is assessed as resident and non-resident for the same transaction. Residence is often defined for individuals as presence in the jurisdiction for more than 183 days. Most jurisdictions base residence of entities on either place of organization or place of management and control. Most systems define income subject to tax broadly for residents, but tax nonresidents only on specific types of income. What

3939-449: Is taxable, with few exceptions. Many countries require business enterprises to prepare financial statements which must be audited. Tax systems in those countries often define taxable income as income per those financial statements with few, if any, adjustments. A few jurisdictions compute net income as a fixed percentage of gross revenues for some types of businesses, particularly branches of nonresidents. Nearly all systems permit residents

4040-411: Is the effective tax rate of Ireland corporation tax system, of which the independent evidence is that it is less than 4%, and as low as 0.005% for major U.S. multinationals (see Irish effective corporate tax rate ). Ireland's Corporate Tax System has seen Ireland labelled a tax haven , and in June 2018, academics estimated that Ireland was the largest global tax haven . Ireland's reputation as

4141-403: Is the deviation from the equilibrium price and quantity ( P ∗ {\displaystyle P^{*}} and Q ∗ {\displaystyle Q^{*}} , respectively) as a result of the taxation of a good. Because of the tax, consumers pay more for the good ( P c {\displaystyle P_{c}} ) than they did before

Taxation in the Republic of Ireland - Misplaced Pages Continue

4242-400: Is the personal tax credit, which is currently €1,650 per year for a single person and €3,300 per year for a married couple. A widowed person in the year of bereavement, or for as long as they have dependent children, may claim the €3,300 credit as well; a higher credit is available to widowed parents during the five tax years following the bereavement. The PAYE tax credit, which is also €1,650,

4343-400: Is the total tax (PAYE and EE–PRSI less SS Benefits) paid by Irish employees, as a % of their gross wages, is also one of the lowest in the OECD. Of the 35 OECD members in 2017, the average Irish single-worker paid 19.4% versus the OECD average of 25.5% (ranked 28th–lowest), and the average Irish married worker paid 1.2% versus the OECD average of 14.0% (ranked 33rd–lowest). In relation to

4444-503: Is therefore given at 40% if the person is paying the higher rate of tax. If the payment is made by salary deduction the payment is treated as a benefit in kind (BIK) and as such is subject to the Universal Social Charge (USC) and PRSI. Tax relief is allowed on service charges paid to a local council for domestic sewage disposal, as well as all payments for domestic water supply or domestic refuse collection or disposal. The relief

4545-536: Is usually known as corporate tax and is commonly levied at a flat rate. Individual income is often taxed at progressive rates where the tax rate applied to each additional unit of income increases (e.g., the first $ 10,000 of income taxed at 0%, the next $ 10,000 taxed at 1%, etc.). Most jurisdictions exempt local charitable organizations from tax. Income from investments may be taxed at different (generally lower) rates than other types of income. Credits of various sorts may be allowed that reduce tax. Some jurisdictions impose

4646-515: Is €1,400 per year (20% of €7,000). Courses must be of at least two years duration, except for postgraduate courses which must be of at least one-year duration. The course must also be approved by Revenue and delivered in a college approved by Revenue. As with medical expenses, since 2007 the relief could be claimed in respect of payments made by any person, irrespective of the relationship between payer and payee. It cannot be claimed in respect of administration, registration, or examination fees. Relief

4747-494: The Peace of Amiens . Addington had taken over as prime minister in 1801, after Pitt's resignation over Catholic Emancipation . The income tax was reintroduced by Addington in 1803 when hostilities with France recommenced, but it was again abolished in 1816, one year after the Battle of Waterloo . Opponents of the tax, who thought it should only be used to finance wars, wanted all records of

4848-532: The décima . The inception date of the modern income tax is typically accepted as 1799, at the suggestion of Henry Beeke , the future Dean of Bristol . This income tax was introduced into Great Britain by Prime Minister William Pitt the Younger in his budget of December 1798, to pay for weapons and equipment for the French Revolutionary War . Pitt's new graduated (progressive) income tax began at

4949-489: The Department of Finance Tax Policy Group , highlighted the distortion of Irish GDP impacted this metric, and Ireland's Tax-to-GNP ratio at 36% was above the OECD average, and in line with the EU–27 average. However, since Apple's 2015 restructuring, Ireland's headline Tax-to-GDP ratio had fallen to the bottom of the OECD range at under 23%. Using 2017 GNI* (Irish 2017 GDP is 162% of Irish 2017 GNI*), Ireland Tax-to-GNI* ratio

5050-664: The EU and OECD averages, but unlike Irish Income taxes, are not overtly progressive. Each year, the Department of Finance is required to produce a report on Estimates for Receipts and Expenditure for the coming year. The table below, is extracted from the "Tax Revenues" section of the report for the prior-year (e.g. the 2017 column is from the 2018 report), by which time the "Tax Revenues" for that year are largely known (although still subject to further revision in later years). The "Tax Revenues" quoted are Exchequer Tax Revenues , and do not include Appropriations-in-Aid ("A–in–A") items,

5151-675: The Exchequer from 1852, kept the progressive income tax, and extended it to cover the costs of the Crimean War . By the 1860s, the progressive tax had become a grudgingly accepted element of the United Kingdom fiscal system. The US federal government imposed the first personal income tax on August 5, 1861 , to help pay for its war effort in the American Civil War (3% of all incomes over US$ 800) (equivalent to $ 21,300 in 2023). This tax

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5252-559: The OECD Tax Database and the OECD Ireland Tax Bulletins . The Department of Finance has a Tax Policy Group which up until 2014, published documents that compared Ireland's taxation system internationally, including the main tax policy differences with other OECD countries. From 2000 to 2014, Ireland's Total Gross Tax-to-GDP ratio was 27–30%, versus the OECD average of 33%, and EU–27 average of 36%. In October 2013,

5353-524: The OECD average (33%); Ireland's Exchequer Tax-to-GNI* ratio of 28%, is in line with the EU–28 average (28%), and the OECD average (27%). Within these aggregate taxation metrics, the most distinctive differences between Ireland's taxation system and those of the average EU–28 and OECD taxation systems, are lower net Irish Social Security Contributions (i.e. PRSI less child benefits), offset by higher Irish Corporation tax receipts. Within Ireland's taxation system,

5454-399: The OECD's Hierarchy of Taxes pyramid (see graphic), which emphasises high corporate tax rates as the most harmful types of taxes where economic growth is the objective. The balance of Ireland's taxes are Property taxes (<3% of ETR, being Stamp duty and LPT) and Capital taxes (<3% of ETR, being CGT and CAT). An issue in comparing the Irish tax system to other economies is adjusting for

5555-864: The US treat an entity as a corporation only if it is legally organized as a corporation. Estates and trusts are usually subject to special tax provisions. Other taxable entities are generally treated as partnerships. In the US, many kinds of entities may elect to be treated as a corporation or a partnership. Partners of partnerships are treated as having income, deductions, and credits equal to their shares of such partnership items. Separate taxes are assessed against each taxpayer meeting certain minimum criteria. Many systems allow married individuals to request joint assessment . Many systems allow controlled groups of locally organized corporations to be jointly assessed. Tax rates vary widely. Some systems impose higher rates on higher amounts of income . Tax rates schedules may vary for individuals based on marital status. In India on

5656-424: The US, these taxes generally are imposed at a fixed rate on wages or self-employment earnings up to a maximum amount per year. The tax may be imposed on the employer, the employee, or both, at the same or different rates. Some jurisdictions also impose a tax collected from employers, to fund unemployment insurance, health care, or similar government outlays. Multiple conflicting theories have been proposed regarding

5757-512: The United Kingdom, and the United States, among others, follow most of the principles outlined below. Some tax systems, such as India , may have significant differences from the principles outlined below. Most references below are examples; see specific articles by jurisdiction ( e.g. , Income tax in Australia ). Individuals are often taxed at different rates than corporations. Individuals include only human beings. Tax systems in countries other than

5858-572: The United States. In fiscal year 1918, annual internal revenue collections for the first time passed the billion-dollar mark, rising to $ 5.4 billion by 1920. The amount of income collected via income tax has varied dramatically, from 1% for the lowest bracket in the early days of US income tax to taxation rates of over 90% for the highest bracket during World War II . While tax rules vary widely, certain basic principles are common to most income tax systems. Tax systems in Canada, China, Germany , Singapore ,

5959-415: The actual change in an individual's or firm's resources due to the tax. The statutory incidence of the tax is irrelevant to the economic incidence of the tax. In fact, the economic incidence is completely determined by the elasticity of supply and demand. Typically, both producers and consumers bear some portion of the economic incidence of the tax, but these portions do not have to be equal. The party with

6060-471: The artificial inflation of Irish GDP by the base erosion and profit shifting (BEPS) tools of U.S. multinationals in Ireland. In 2017, the Central Bank of Ireland replaced Irish GDP with Irish GNI* to remove the distortion; 2017 GDP was 162% of 2017 GNI* (EU–28 2017 GDP was 100% of GNI). Properly adjusted, Ireland's Total Gross Tax-to-GNI* ratio of 36% is in-line with the EU–28 average (36%), and above

6161-473: The average wage, to employee tax at 67% of the average wage. In October 2013, the Department of Finance Tax Policy Group , highlighted that Ireland has the most progressive personal tax system in the OECD. By September 2016, the Irish Tax Institute showed that Ireland was the 2nd most progressive personal tax system in the OECD. The progressive nature of Ireland's personal tax system is also apparent in

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6262-487: The corporation. Deductions typically include all income-producing or business expenses including an allowance for recovery of costs of business assets. Many jurisdictions allow notional deductions for individuals and may allow deduction of some personal expenses. Most jurisdictions either do not tax income earned outside the jurisdiction or allow a credit for taxes paid to other jurisdictions on such income. Nonresidents are taxed only on certain types of income from sources within

6363-471: The distortion of Irish GDP impacted this metric and that Ireland's Consumption Tax as % of GNP ratio at 12%, and VAT as % of GNP ration at 8%, was at the EU–27 average for both metrics. Ireland's taxation system is distinctive for its low headline rate of corporation tax at 12.5% (for trading income), which is half the OECD average of 24.9%. While Ireland's corporate tax is only 16% of Total Net Revenues (see above), Ireland's corporate tax system

6464-588: The distribution of Irish personal tax. In October 2013, the Department of Finance Tax Policy Group , highlighted the following personal tax (PAYE and EE–PRSI), statistics from the Irish Revenue Commissioners for the 2012 tax year: The above format of the Tax Policy Group has never been reproduced, in April 2018, the OECD and the Irish Revenue Commissioners disclosed that in 2015: Irish headline VAT

6565-444: The economic impact of income taxes. Income taxes are widely viewed as a progressive tax (the incidence of tax increases as income increases). Some studies have suggested that an income tax does not have much effect on the numbers of hours worked. Tax avoidance strategies and loopholes tend to emerge within income tax codes. They get created when taxpayers find legal methods to avoid paying taxes. Lawmakers then attempt to close

6666-404: The figure. There are two types of tax incidence or tax burden created by a tax: the statutory incidence of a tax and the economic incidence of a tax. Typically, a general reference to "tax incidence" refers to the economic incidence of a tax. The statutory incidence of a tax falls on the party, producers or consumers, that has to physically send a check to the government in the amount of

6767-430: The gross amount of income of most types plus the net business income earned within the jurisdiction. Expenses incurred in a trading, business, rental, or other income producing activity are generally deductible, though there may be limitations on some types of expenses or activities. Business expenses include all manner of costs for the benefit of the activity. An allowance (as a capital allowance or depreciation deduction)

6868-416: The higher of an income tax or a tax on an alternative base or measure of income. Taxable income of taxpayers' resident in the jurisdiction is generally total income less income producing expenses and other deductions. Generally, only net gain from the sale of property, including goods held for sale, is included in income. The income of a corporation's shareholders usually includes distributions of profits from

6969-435: The history of civilization , these preconditions did not exist, and taxes were based on other factors. Taxes on wealth , social position, and ownership of the means of production (typically land and slaves ) were all common. Practices such as tithing , or an offering of first fruits , existed from ancient times, and can be regarded as a precursor of the income tax, but they lacked precision and certainly were not based on

7070-589: The income tax unconstitutional , the 10th amendment forbidding any powers not expressed in the US Constitution, and there being no power to impose any other than a direct tax by apportionment. In 1913, the Sixteenth Amendment to the United States Constitution cleared the unconstitutionality obstacle which previously had not allowed for the implementation of a federal income tax before 1913 in

7171-400: The introduction of the euro in Ireland. For administrative purposes, taxable income is expressed under four schedules: Since 1 January 2015, the tax rates apply as follows: There are 2 tax brackets, 20% (the standard rate ) and the balance of income at 40% (the higher rate ). The brackets depend upon the individual's category. The €43,550 amount may, for married couples, be increased by

7272-615: The jurisdiction is generally total income less income producing expenses and other deductions. Generally, only net gain from the sale of property, including goods held for sale, is included in income. The income of a corporation's shareholders usually includes distributions of profits from the corporation. Deductions typically include all income-producing or business expenses including an allowance for recovery of costs of business assets. Many jurisdictions allow notional deductions for individuals and may allow deduction of some personal expenses. Most jurisdictions either do not tax income earned outside

7373-462: The jurisdiction or allow a credit for taxes paid to other jurisdictions on such income. Nonresidents are taxed only on certain types of income from sources within the jurisdictions, with few exceptions. The concept of taxing income is a modern innovation and presupposes several things: a money economy , reasonably accurate accounts , a common understanding of receipts, expenses and profits , and an orderly society with reliable records. For most of

7474-410: The jurisdiction. See, e.g. , the discussion of taxation by the United States of foreign persons . Residents, however, are generally subject to income tax on all worldwide income. A handful of jurisdictions (notably Singapore and Hong Kong) tax residents only on income earned in or remitted to the jurisdiction. There may arise a situation where the tax payer has to pay tax in one jurisdiction he or she

7575-399: The jurisdictions, with few exceptions. Most jurisdictions require self-assessment of the tax and require payers of some types of income to withhold tax from those payments. Advance payments of tax by taxpayers may be required. Taxpayers not timely paying tax owed are generally subject to significant penalties, which may include jail-time for individuals. Taxable income of taxpayers resident in

7676-435: The largest being Social Security (or PRSI) which for 2015 was €10.2 billion, and other smaller items. Irish Personal Income tax, and the two main Irish consumption taxes of VAT and Excise, have consistently been circa 80% of the total Irish Exchequer Tax Revenue, with the balance being Corporate tax. Comparisons of Ireland's tax system and international tax systems are complicated by two issues: Key sources for comparison are

7777-434: The lesser of: €25,550 or the income of the second spouse. This brings the total maximum standard rate band for a married couple to €69,100, twice the single person's band. The increase is not transferable between spouses. Irish income tax brackets (2019) The €44,300 amount may, for married couples, be increased by the lesser of: €26,300 or the income of the second spouse. This brings the total maximum standard rate band for

7878-517: The loopholes with additional legislation. That leads to a vicious cycle of ever more complex avoidance strategies and legislation. The vicious cycle tends to benefit large corporations and wealthy individuals that can afford the professional fees that come with ever more sophisticated tax planning, thus challenging the notion that even a marginal income tax system can be properly called progressive. The higher costs to labour and capital imposed by income tax causes dead weight loss in an economy, being

7979-495: The loss of economic activity from people deciding not to invest capital or use time productively because of the burden that tax would impose on those activities. There is also a loss from individuals and professional advisors devoting time to tax-avoiding behaviour instead of economically productive activities. Bracket creep is usually defined as the process by which inflation pushes wages and salaries into higher tax brackets , leading to fiscal drag . However, even if there

8080-490: The lowest effective employment tax rates in the OECD, with Irish average married wage-earners paying an employee tax rate of 1.2%. In 2018, the Irish Revenue Commissioners disclosed that 80% of 2017 Irish corporate tax was paid by foreign multinationals, and the top 10 multinationals paid 40% of Irish Corporation tax in 2017. Ireland's Corporate tax system is controversial and has drawn labels of Ireland as

8181-507: The market (a hotel chain can decide to sell its beachfront properties). This means that the economic incidence on consumers and producers can change in the long run. The size and impact of the tax wedge vary considerably across countries. European countries, especially in Scandinavia, tend to have a high tax wedge due to comprehensive social security systems and robust public services. Countries like Belgium, Germany, and France have some of

8282-413: The married-worker employee tax by 16.4%, whereas for the OECD average it was 9.8%. Ireland's lower EE–PRSI, and higher child benefits, have been noted in other studies. Aside from lower employee social security levies (e.g. EE–PRSI), the most distinctive aspect of Ireland's personal tax system is the level of Progressivity , as defined by the ratio of the employee tax (or tax wedge for income) at 167% of

8383-460: The more inelastic (steeper) curve bears more of the tax. For example, consumers of tobacco products typically bear more of the tax on tobacco, because they are addicted to the product and their consumption is not strongly affected by price changes (demand is inelastic). Producers bear more of the tax when supply is inelastic; for example, producers of beachfront hotels would bear more of a tax on hotels and accept lower prices for their product, because

8484-408: The most distinctive element is the ratio of net Personal Income taxes on higher earners versus lower earners, which is called progressivity . In 2016, the OECD ranked Irish personal taxation as the 2nd most progressive tax system in the OECD, with the top 10% of earners paying 60% of taxes. The 2018 OECD Taxing Wages study showed Irish average single and average married wage-earners paid some of

8585-479: The other hand there is a slab rate system, where for income below INR 2.5 lakhs per annum the tax is zero percent, for those with their income in the slab rate of INR 2,50,001 to INR 5,00,000 the tax rate is 5%. In this way the rate goes up with each slab, reaching to 30% tax rate for those with income above INR 15,00,000. Residents are generally taxed differently from non-residents. Few jurisdictions tax non-residents other than on specific types of income earned within

8686-402: The quantity exchanged falls ( Q ∗ → Q t ) {\displaystyle (Q^{*}\rightarrow Q_{t})} . The difference between P c {\displaystyle P_{c}} and P s {\displaystyle P_{s}} will be equivalent to the size of the per-unit tax. The filled-in "wedge" created by

8787-422: The single worker, the OECD noted that a driver of the lower Irish rate is that EE–PRSI (or employee social security contributions) are lower in Ireland versus the OECD average. PAYE and ER–PRSI accounted for 87% of the Irish tax wedge for labour income, whereas for the OECD average it was 77%. In relation to the married worker, the OECD noted the additional effect of Irish child benefits and provisions which reduced

8888-500: The tax administration of the country or by the payer using formulas provided by the tax administration. Payees are generally required to provide to the payer or the government the information needed to make the determinations. Withholding for employees is often referred to as "pay as you earn" ( PAYE ) or "pay as you go." Income taxes of workers are often collected by employers under a withholding or pay-as-you-earn tax system. Such collections are not necessarily final amounts of tax, as

8989-586: The tax destroyed along with its repeal. Records were publicly burned by the Chancellor of the Exchequer , but copies were retained in the basement of the tax court. In the United Kingdom of Great Britain and Ireland , income tax was reintroduced by Sir Robert Peel by the Income Tax Act 1842 . Peel, as a Conservative , had opposed income tax in the 1841 general election , but a growing budget deficit required

9090-420: The tax must be claimed retrospectively; in others it is processed as an increase to tax credits. The vast majority are only allowed at the standard tax rate of 20%. A person purchasing private medical insurance is entitled to tax relief at 20%, which is usually given at source – the person pays 80% of the cost, and the government pays the rest directly to the insurance company. Persons aged over 50 are entitled to

9191-423: The tax year is exempt from income tax if his or her income is under €18,000 per year. A married couple with income under €36,000 per year is also exempt if either spouse is aged 65 or over or reaches 65 during the year; the exemption amount is increased by €575 for each of the couple's first two dependent children and by €830 for each subsequent child. A person or couple earning slightly over the limit may claim what

9292-399: The tax, and suppliers receive less for the good ( P s {\displaystyle P_{s}} ) than they did before the tax . Put differently, the tax wedge is the difference between the price consumers pay and the value producers receive (net of tax) from a transaction. The tax effectively drives a "wedge" between the price consumers pay and the price producers receive for

9393-449: The tax. Self-assessment means the taxpayer must make a computation of tax and submit it to the government. Some countries provide a pre-computed estimate to taxpayers, which the taxpayer can correct as necessary. The proportion of people who pay their income taxes in full, on time, and voluntarily (that is, without being fined or ordered to pay more by the government) is called the voluntary compliance rate . The voluntary compliance rate

9494-419: The territorial system, only local income – income from a source inside the country – is taxed. In the residential system, tax residents of the country are taxed on their worldwide (local and foreign) income, while non-residents are taxed only on their local income. In addition, a very small number of countries, notably the United States , also tax their non-resident citizens on worldwide income. Countries with

9595-425: The total cost of labour to the employer (PAYE and ER–PRSI), is one of the lowest in the OECD. Of the 35 OECD members in 2017, the average Irish single-worker cost 27.2% in taxes versus the OECD average of 35.9% (ranked 29th–lowest), and the average Irish married worker cost 10.8% in taxes versus the OECD average of 26.1% (ranked 31st–lowest). The OECD's 2018 Taxing Wages shows Ireland's employee tax on wages, which

9696-655: The value of the wages and salaries has not increased at all. The net effect is that in real terms taxes rise unless the tax rates or brackets are adjusted to compensate. Many types of income are subject to income tax, which is very variable. It all depends on the country and its tax laws. In general, countries impose taxes on income from wages, salaries, interest, dividends, and rental income. The most typical ones are wage and salary, which are almost always subject to taxation withheld by employers. Some one-time payments such as bonuses paid to employees are taxable. Dividends and interest (stocks or bonds) are usually also taxed. There

9797-411: The worker may be required to aggregate wage income with other income and/or deductions to determine actual tax. Calculation of the tax to be withheld may be done by the government or by employers based on withholding allowances or formulas. Nearly all systems require those whose proper tax is not fully settled through withholding to self-assess tax and make payments prior to or with final determination of

9898-416: The world is a difficult and somewhat subjective enterprise. Tax laws in most countries are extremely complex, and tax burden falls differently on different groups in each country and sub-national unit. Of course, services provided by governments in return for taxation also vary, making comparisons all the more difficult. Countries that tax income generally use one of two systems: territorial or residential. In

9999-591: Was one year of hard labor and confiscation of the entirety of a person's property. Because it caused popular discontent, this income tax was abolished in 22 CE. In the early days of the Roman Republic , public taxes consisted of modest assessments on owned wealth and property. The tax rate under normal circumstances was 1% and sometimes would climb as high as 3% in situations such as war. These modest taxes were levied against land, homes and other real estate, slaves, animals, personal items and monetary wealth. The more

10100-469: Was present at midnight, a rule which was nicknamed the " Cinderella clause". A person may also elect to be resident in Ireland in a year in which he arrives in Ireland, once he can satisfy Revenue that he intends to remain there for the next tax year. A person who is resident in Ireland for three consecutive years becomes ordinarily resident , and ceases to be ordinarily resident after he has been non-resident in Ireland for three consecutive years. A person

10201-469: Was repealed and replaced by another income tax in 1862. It was only in 1894 that the first peacetime income tax was passed through the Wilson-Gorman tariff . The rate was 2% on income over $ 4000 (equivalent to $ 126,000 in 2023), which meant fewer than 10% of households would pay any. The purpose of the income tax was to make up for revenue that would be lost by tariff reductions. The US Supreme Court ruled

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