This is a study of the top 400 earners for the tax year 2003. The study examines the effective tax rate of these high earners and provides a comparison with a similar examination of the effective rates of the top 400 earners for the tax year 2002.

2. Calculation of Effective Rates

The effective rate was calculated by dividing the income tax payable by the individuals concerned, for 2003, by the income declared for that year, and expressing the result as a percentage.

As in the case of the 2002 study:

• the case base used for the 2003 tax year study is the top 400 income earners on Revenue’s computer record for that year and,
• the income figure used is the gross income declared. This is the figure before deducting specific reliefs, such as, capital allowances or trading losses, but it does not include certain income, which is exempt for tax purposes, such as artists’ exempt income and patent income.

3. Tables of Results

The results of the study are set out in the tables in Annex 1:

Table 1 shows the distribution of the effective tax rates of the top 400 earners for the 2003 and the 2002 tax years in bands of 5%,

Table 2 shows the distribution of those effective tax rates in bands of 15%, and

Table 3 shows the distribution for the same two years of the effective rates of the subset of the top 400 earners who had effective rates of less than 30%.

4. Comparison of 2003 and 2002 Results

The numbers in the effective rate bands of less than 30% for 2003 remained constant when compared with the 2002 results.

·        The number of taxpayers with a zero effective rate decreased from 6 to 3

·        The number of taxpayers with an effective rate of less than 15% increased from 79 to 80.

·        The number of taxpayers with an effective rate of less than 20% increased from 95 to 104.

In both 2002 and 2003 approximately three quarters of the taxpayers concerned had effective tax rates of 20% or more and about half had effective rates of 35% or more.

Overall, the data do not indicate that there was a significant increase in the use of the various tax reliefs to reduce the effective tax rates of these taxpayers.

5.    Main reliefs claimed in 2003 by individuals with an effective rate of less than 30%.

The main reliefs claimed by the 150 individuals with an effective rate of less than 30% were property-based capital allowance incentives.

6.    Effective rates are a broad measure

There are a number of factors to bear in mind in considering these results.

·        Reliefs that reduced the effective tax rates shown in the tables include loss relief and standard wear and tear allowances, reflecting real trading losses and depreciation of business assets.

·        Reliefs reducing effective rates would also, for example, have included relief for interest paid on borrowings for business investments in partnerships and companies and relief for charitable donations.

·        The effective rates shown are effective rates of Irish tax on income and, in some cases, the effective tax rates would increase significantly if adjusted to reflect tax payments in respect of that income in other jurisdictions.

The results do not reflect the restriction in Finance Act 2006 of certain reliefs for 2007 and subsequent years, which is intended to prevent high-income taxpayers using those reliefs to reduce their effective rates below about 20%.

Table 1: Distribution of the top 400 earners in ranges of effective tax rates 2003 and 2002

Range of Effective Rate	No. of Earners		% of Total
%	2003	2002	2003	2002
0	3	6	0.75%	1.50%
> 0 < 5	45	37	11.25%	9.25%
5 < 10	17	23	4.25%	5.75%
10 < 15	15	13	3.75%	3.25%
15 < 20	24	16	6.00%	4.00%
20 < 25	22	25	5.50%	6.25%
25 < 30	24	30	6.00%	7.50%
30 < 35	51	55	12.75%	13.75%
35 < 40	119	112	29.75%	28.00%
40 < 45	80	83	20.00%	20.75%
All Ranges	400	400	100%	100%

TABLE 2: Summary in 15% Ranges

Range of Effective Tax Rate	No. of Earners % of Total
%	2003	2002	2003	2002%
0 < 15	80	79	20%	19.75%
15 < 30	70	71	17.5%	17.75%
30+	250	250	62.5%	62.50%
All ranges	400	400	100%	100%

TABLE 3: Distribution of those individuals with an effective tax rate of less than 30% - 2003 and 2002

Range of Effective Tax Rate	No. of Earners % of Total
%	2003	2002	2003	2002: % of 150
0	3	6	2%	4.00%
> 0 < 5	45	37	30%	24.67%
5 < 10	17	23	11.33%	15.33%
10 < 15	15	13	10%	8.67%
15 < 20	24	16	16%	10.67%
20 < 25	22	25	14.67%	16.66%
25 < 30	24	30	16%	20.00%
All Ranges	150	150	100%	100%