Families in Ireland pay almost zero tax: OECD
Published 15/04/2015 | 02:30
A couple here with two children on an average wage end up paying effectively almost zero tax, the lowest in the developed world, a global economic think-tank has claimed.
When €270 a month in child benefit and tax provisions are taken into account, a family with two children, on the average wage, takes home 99.8pc of their gross wages, according to the Organisation for Economic Cooperation and Development.
The Paris-based organisation said that after tax and benefits, average single workers take home close to 80pc of their gross pay. But the OECD suggested a married couple with one partner working at the average wage fares much better.
"Taking into account child-related benefits and tax provisions, the employee net tax burden for an average married worker with two children in Ireland was reduced to 0.2pc in 2014, which is the lowest in the OECD, and compares with a reduction to 14.8pc for the OECD average," said the tax trends report.
"This means that an average married worker with two children in Ireland had a take-home pay, after tax and family benefits, of 99.8pc of their gross wage compared to 85.2pc for the OECD average."
Business body Ibec, however, warned against like-for-like comparisons with other countries.
It said couples here faced high childcare costs that were subsidised in other countries. And while the OECD data contains PRSI contributions, it is not clear if it takes account of the Universal Social Charge.
The OECD research also does not take account of other taxes faced by families, including property tax and water charges.
For single workers, the OECD said Ireland has the eighth lowest so-called tax wedge - the proportional difference between the costs of a worker to their employer and the take-home pay received by the worker - among the 34 OECD member countries. The average single worker in Ireland faced a tax wedge of 28.2pc in 2014, compared with the OECD average of 36pc.
Ibec accepted Ireland was a low income-tax country at lower than average earnings, but for earners above this level, it said Ireland was highly taxed compared with the rest of the world.
"We need to be careful about like-for-like comparisons," said Ibec economist Fergal O'Brien. "That applies to the benefits and the social security contributions, because in Ireland the social security contribution buys you very little.
"In other countries, it buys you a healthcare system and a pension that you then don't have to go and pay out of your take-home pay."
Mr O'Brien added that above the average wage, tax rates were relatively high.
"At average earnings, income tax is about the OECD average," he said. "But when you go up the earnings, we become much higher relative to the OECD average."