Irish workers enjoy some of lowest tax rates in EU

IRELAND’S status as a low-tax economy has been confirmed with a new report on taxation in the EU which shows Irish workers enjoy some of the lowest income tax rates anywhere in Europe.

However, it also shows that any benefit for Irish consumers from the Government’s low income tax policy is largely offset by Ireland having one of the highest tax rates on goods and services within the EU.

The study by Eurostat, the EU Statistical Office, reveals that tax revenue in the Republic is just over 30% of GDP.

Although newer EU member states from eastern Europe tend to have lower tax ratios, Ireland as well as Spain and Portugal were singled out as countries which have “notably low” overall tax rates. While there are two standard income tax rates in the Republic (20% and 42%), the average implicit tax rate is estimated at 26.3% — almost 10% lower than the EU average and the fourth lowest after Cyprus, Malta and Britain.

There are wide disparities in the top personal income tax rates between the different EU member states ranging from 19% in Slovakia to 59% in Denmark. However, the report also reveals Irish people like those in the rest of the EU are experiencing growing levels of taxation on consumption which have increased for the third year in a row.

Official statistics show that the Government took in 26.5 cent of every €1 spent on goods and services in taxes in 2004 — the latest year for which figures are available.