TLDR: A recent Revenue report reveals a continued decline in the number of high-income individuals affected by the High-Income Individuals’ Restriction (HIIR), resulting in lower additional tax revenue. While the measure brought in €13.6 million from a mere 127 taxpayers, it’s a stark contrast to its early years. With high earners fleeing the net, questions arise about the effectiveness of this financial policy.
In a newly published report for 2023, the Revenue has highlighted a decreasing trend in the number of high-income earners subject to strict taxation rules. The High-Income Individuals’ Restriction (HIIR), which started in January 2007 to ensure those earning above €500,000 paid an effective income tax of 20%, now only encompasses 127 individuals. This represents a fall of 26 from the previous year, leading to a total tax revenue of €13.6 million—€3.7 million less than in 2022. These figures reveal a concerning pattern that has seen the number of individuals caught in this net dwindle for over a decade.
The HIIR underwent significant changes following the financial crash of 2010, with the threshold adjusted from €250,000 to €125,000 and a target effective rate set at around 30% for those earning €400,000 or more. Once upon a time, in 2010, the scheme captured 1,544 individuals and generated an impressive €80.1 million. Fast forward to 2023, and we find ourselves at rock bottom—both in terms of the number of taxpayers affected and the tax revenue generated.
Interestingly, among the 127 individuals still trapped by this restriction, 46 with adjusted incomes of €400,000 or more paid an average tax rate of 29.7%, which shoots up to 39.1% when including the Universal Social Charge (USC). Whether this is a blessing or a curse for the state is open to debate—what we do know is that the fines of bureaucracy have entangled some earners but not enough to sustain significant revenue increases.
But let’s be honest: if there’s one thing we learn from this saga, it’s that the taxman is far from the only one impacted. The fact that 27 individuals were drawn into paying taxes for the first time this year should perhaps be the silver lining for policymakers right now. It’s like throwing a net into a dwindling pond—you might catch a few fish, but more often than not, you’re left wondering what happened to the school.
For those with incomes slightly below the €400,000 threshold, averaging an effective tax rate of 17.5%—which jumps to 25.6% when USC is added—the story remains the same. While the Revenue reports a €2.8 million lift due to this restriction in their pockets, it’s crucial to wonder if such measures are suffocating growth rather than driving it. Let’s face it: are we truly incentivizing the hardworking individuals who help drive our economy or merely squeezing water from a stone?
An interesting fact to end on: in 2019, Ireland saw 132,000 high earners, a stark contrast to today’s mere 127. If trends continue, we might just find ourselves instead having a tax England rather than an “Ireland: land of opportunity.” Who’d have thought that high-flyers would prefer to fly away than be caught in the tax net? It seems our strategy needs a serious rework.
For further details on the Revenue’s findings, you can check out the full report on Independent.ie.
