Dáil Éireann - Volume 592 - 09 November, 2004

Written Answers. - Tax Code.

  202. Mr. P. McGrath asked the Minister for Finance the estimated gain to the Exchequer by introducing a minimum flat rate of tax of 10%, 15%, 20%, 25% and 30% respectively to all persons who have gross income in excess of €200,000 per annum. [28208/04]

  Mr. Cowen: Before the estimated gain to the Exchequer from introducing such a minimum flat rate of tax could be calculated, it would be necessary to make a number of assumptions regarding what would be allowed and not allowed, for example, in relation to deductions for the purpose of calculating the tax. Before such a tax could be introduced, it would be necessary to define the gross income to which it would apply and certain issues would arise in relation to that definition. For instance, it would be necessary to decide whether gross income should be defined as income prior to deductions for capital allowances, interest paid, losses, allowable expenses, retirement annuities or superannuation contributions. It would also be necessary to decide whether gross income should include certain other income which is not income for tax purposes or is exempt from tax and how to treat [199] other income sources such as interest income that does not need to be declared or is not recorded but from which tax has been deducted. For these reasons the definition of gross income for the application of such a tax is likely to be different to the gross income figures captured on Revenue’s system.

While there are figures available on the gross income of individuals for the short tax year 2001, the figures on the gross income of individuals in respect of the tax year 2002 and later are not yet available. Estimating the gross income of such individuals and making assumptions regarding the level of their likely allowable deductions would add further unreliability to the estimation exercise. In addition, in attempting to estimate the gain to the Exchequer, it would be necessary to make assumptions regarding the behaviour of individuals in response to the introduction of such a minimum flat rate of tax. Those paying at tax rates in excess of whatever minimum was prescribed would undoubtedly see the new rate as an opportunity for a tax reduction. For these reasons, it is not possible at this time to answer the question in the form sought by the Deputy.