The Government could raise €433 million by introducing a 43 per cent income tax rate for workers earning more than €80,000 a year, an analysis by the Revenue Commissioners states.

In a document prepared in advance of October’s budget, Revenue outlines estimates on how many people will pay tax, and at what rates, come January.

Tax authorities have worked out several scenarios related to the potential cost/gain of increasing/decreasing income tax rates.

The study shows that the introduction of a third rate of tax of 43 per cent on earnings above €80,000 could yield €433 million in a full year. Levying the rate only on earnings of more than €120,000 would yield €280 million, it says.

An individual currently earning €100,000 pays €38,801 in income tax, but if a rate of 43 per cent kicked in on earnings of €80,000 and more, they would pay a further €600 in tax.

Self-employed

Introducing a 43 per cent rate could bring the top tax rate levied on PAYE workers into line with that paid by the self-employed, who currently pay a three-percentage-point universal social charge surcharge on incomes of €100,000 and more.

However, it could also be introduced at the same time as the existing top rate of tax, at 40 per cent, is cut.

According to Revenue figures, cutting the existing top rate of tax to 39 per cent would cost €348 million in a full year. Switching the burden from middle-income to higher-income earners could be viewed as politically palatable.

Middle-income earners

Last year, the phased withdrawal of the €1,650 PAYE tax credit from higher earners was mooted, while there have been frequent criticisms of the tax burden on middle-income earners as a result of the low-level earnings at which people start paying tax at 40 per cent – above €34,550 for a single person and €43,550 for a couple – when compared with other developed countries.

The Revenue projections follow a submission to the Tax Strategy Group from the Department of Employment Affairs and Social Welfare, which put forward the prospect of increasing the rate of social insurance, PRSI, by half a percentage point.

Other figures published by Revenue show that, even with no changes, 65,000 taxpayers would find themselves paying income tax at the higher 40 per cent rate from January unless income tax thresholds are increased in the budget.

A further 57,600 workers would find themselves falling into the tax net at the lower 20 per cent rate, as rising pay brings their income above the threshold.