Irish income tax rates among lowest in developed world

Breadwinners in single-earner families in the Republic pay less tax on their wages than workers in any other industrialised country, the latest figures show.

Statistics detailing the tax take from wages in the 30 Organisation for Economic Co-operation and Development (OECD) countries show that single workers in the Republic paid an average of €23.80 out of every €100 of their earnings in tax and social insurance in 2004.

According to the Central Statistics Office, average earnings were €700 a week or €36,400 a year in 2004. This means that the State's average share of single workers' pay packets last year was €166.60 a week or €8,663.20 in total.

The OECD ranks this as the fourth-lowest income tax and social insurance take of its 30 members. The OECD average is 36.5 per cent. Mexico boasts the lowest rate in this category at 15.4 per cent and Germany is the highest with 50.7 per cent.

But the figures for married Irish couples with two children, where one spouse is working and earning the average wage, show that the Government got just 5.9 per cent, or €41.30 a week, of their pay in tax and social insurance in 2004.

This is the lowest amount of tax paid by any earner covered by the OECD figures. The highest take listed under this heading is France with 39 per cent. The OECD average is 26.6 per cent.

The calculation includes allowances and adds the child benefit paid by the State to the family to its earnings. When the OECD subtracts social insurance, it shows that these workers ended up with a gain amounting to €4.20 for every €100 they earned last year. This comes to €30 a week. However, their social insurance payments still exceeded this.

Single-parent families with two children and earning two-thirds of the average wage made a gain of 20.2 per cent, which works out at around €95 a week, in 2004. The OECD points out that the benefits these families received exceeded their tax and social insurance contributions.

However, the OECD figures do not include indirect taxes like VAT, excise and other charges. Economic and Social Research Institute economist Danny McCoy said yesterday that these are at the higher end of the scale in the Republic.

"It reflects the model that we have opted for, which is to reduce income taxes and to tax expenditure," he said. He pointed out that last year the Government collected €10.6 billion in income tax and €10.7 billion in VAT, while it took another €5 billion in excise.

"So you had €15 billion coming in on the expenditure side compared to €10 billion in income tax," he said. He said the figures do not reflect services provided by countries with higher tax takes.