Cowen Ready To Cap Irish Tax Allowances

by Jason Gorringe, Tax-News.com, London

25 October 2005

Irish Finance Minister Brian Cowen announced in a speech last week that he is considering limiting the amount of allowances and deductions that an individual can claim in order to ensure that wealthy people pay an appropriate amount of tax.

Speaking at the Fianna Fail party conference in Killarney last week, Mr Cowen indicated that he may use the forthcoming budget as an opportunity to bring in new measures capping tax allowances and incentives for business people, a subject that has been the source of much controversy in recent weeks since it emerged that several millionaires have managed to whittle down their tax liability to virtually nothing.

According to figures released by the Finance Ministry in September covering the 'short' tax years of 2001 and 2002, 30 individuals with incomes of more than EUR1 million per year who were resident in Ireland for tax purposes paid only small amounts of tax, and in some cases no tax at all. An additional 67 individuals whose income was between EUR500,000 and EUR1 million paid tax at the 20% marginal rate, while a further 10 people paid no tax.

"It is unacceptable to me that some of the wealthiest residents in Irish society should use property and other tax incentives to avoid paying any income tax while at the same time enjoying the services provided by the state," Cowen told the delegates.

The Finance Minister went on to add that he is considering implementing so-called "horizontal measures," such as a cap on total tax allowances, which would set a limit on the amount that any one person could claim.

However, Cowen stated that he would be mindful of the economic impact of these measures, particularly with regard to employment in the construction industry.

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