DUBLIN: The annual Organisation for Economic Co-operation and Development’s flagship publication on taxes and wages shows the progressive nature of the Irish tax system, and may highlight the difficulties any government could face if it sanctioned radical cuts to the Universal Social Charge.
The OECD’s measure of the personal tax rate across 35 countries for a single-earning household with children showed Ireland was among the lowest rate of only 1.2% of gross wages after child and other benefits kick in. That compares with the average 14% rate across the OECD.
It said that Ireland had a large decrease in personal tax rates for the single worker with children, “due in large part to reforms in 2002, which increased the single parent tax credit, child benefits and the household income supplement”.
Income tax, with employee and employer social security contributions, comes to just over 27% of labour costs in Ireland, compared with an OECD average of 36%.
The stand out feature in the report was the highly progressive nature of the Irish taxation system, said Dermot O’Leary, chief economist at Goodbody.
He said that in the noughties, Government policy was focused on taking people out of the tax net. That policy was reversed during the crash, which included the introduction of the USC.
Mr O’Leary said that in terms of tax, reductions have to be compensated with tax changes in other areas, especially as the economy reaches full employment.
