Pay your fair share of tax... and no more

Pearse Kenney – Senior Tax Manager with HC Financial Advisers Ltd

Get the sneaking feeling you are paying too much tax? You may well be, says Pearse Kenney

Exchequer returns for the first nine months of the year, which revealed that the State has taken in over €700 million more than had been expected at the start of the year, were  greeted with much back slapping around the Government benches. The Taoiseach and the Minister for Finance variously laid claim that the results were testament to the Government’s sound economic stewardship since it came to power. Somewhat conveniently they ignored the fact that, when all is said and done, they have merely carried out the policies started by the previous incumbents as dictated to by the Troika.

Income Tax payers continue to be the largest contributors to the State coffers. Revenue’s Annual Report for 2013 showed that Income Tax contributed towards more than 40 per cent of the total net tax receipts for the year. This continued a recent trend that is likely to be repeated in 2014. To put this in context, in 2007 Income Tax accounted for less than 30 per cent of the State’s net tax receipts. In short, after the recession hit the Government became increasingly reliant on Income Tax payers in order to keep the show on the road.

Little wonder then that a lot of taxpayers have a nagging feeling that they are paying too much tax. In some instances, this feeling can be explained away by the introduction of the USC, the narrowing of tax bands, the reduction in tax credits and the removal of reliefs over the last couple of years. However, in a lot of cases this feeling is well justified.

The majority of Income Tax payers in Ireland are within the PAYE regime. These individuals pay their tax through the payroll and assume that what they pay is the appropriate amount for them. And, unless they are obliged to complete a tax return (by virtue of having non-employment income in the year, for example) this assumption often goes unchallenged. In a lot of cases, this leads to some people unwittingly paying more tax than is necessary.

The PAYE system relies on the details provided by Revenue to employers whose duty it is to operate the PAYE system. Employers are not allowed to deviate from the detail provided in calculating the tax due on their employees’ wages and salaries. It is up to each individual employee to take ownership of their own personal tax position to ensure that the details which their employer holds for them fully maximises their allowances and credits and by extension that they are paying the correct amount of tax through the payroll.

And, if there is room to increase their allowances and credits, then the employee should contact Revenue to advise them accordingly.

In addition, there are tax reliefs which would not necessarily be claimed through the payroll that go a begging each year. For example, tax relief available on unreimbursed medical expense and tuition fees remain unclaimed year on year.

The good news is that all is not lost. Currently, an individual is allowed to re-visit their tax position for up to four tax years and claim any refunds which fall due directly from Revenue. This means that refunds, which are due for 2010 and succeeding tax years, may still be claimed. Claims referable to 2010 must however be claimed before the end of this calendar year.

Furthermore, the process for claiming tax refunds has become a lot more streamlined over the last few years, as most claims can now be made on-line by the individual or an adviser on their behalf. So the days of filling out long intimidating tax forms in order to get some tax back are now nearly gone.

While the burden of the Income Tax payer should be alleviated over the next few years, stealth taxes like the Local Property Tax and water charges will likely extinguish any gain for some time. Therefore, the taxpayer should be diligent in saying to the taxman, ‘This far you can come but no further.’

HC Financial Advisers…We advise


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