Ireland is among one of the least taxed countries in the developed world, according to authoritative world rankings from the Organisation for Economic Co-operation and Development (OECD).
The country ranked among the lowest last year, as measured for the so-called tax wedge: The proportion the government takes as a percentage of total labour costs.
Ireland ranks low in the world tax league for both an individual earner with no children, and a married one-earner couple with two children.
The tax wedge includes income taxes, and employee and employer social security contributions.
Ireland has the seventh- lowest tax wedge of 34 jurisdictions for a single person without children.
The tax wedge is also below the OECD median for a married single- earner couple with two children.
For the single worker without children on income of the average worker, the Irish tax wedge accounts for 27.5% of total labour costs, which is below the average of 35.9% across all 34 countries surveyed by the OECD.
The research from the Paris-based think tank shows Ireland’s tax wedge of 27.5% for a single worker compared to the 55.3% applied in Belgium, which has the highest tax wedge in the developed world.
The Irish tax wedge is also much lower than Italy, which has a tax wedge of 49%; Sweden on 42.7%; and Turkey on 38.3%. It is also lower here than in the US and the UK, which have tax wedges of 31.7% and 30.8%, respectively.
For the single worker, the OECD research shows only Switzerland, on 22.2%; Korea, on 21.9%; Israel, on 21.6%; Mexico, on 19.7%; New Zealand, on 17.6%; and Chile, on 7%, have lower tax wedges than Ireland’s.
For the one-earner married couple with two children, Ireland has the third lowest “family tax wedge” in the OECD world.
The OECD research shows that for this family type, the tax wedge here is 9.5%. This is above Chile and New Zealand, which have the lowest tax wedges for this family type, of 7% and 4.9%.
Ireland’s family tax wedge of 9.5% compares with the 40.5% applied in France, which has the world’s highest tax wedge of this type. The family tax wedge in the UK is 26.3%, while in the US it is 20.7%.
The OECD also compares the tax wedges of the single worker with the one-earner married couple with two children and finds the “savings” for the married couple are relatively high in Ireland.
“The savings realised by a one-earner married compared to a single worker are greater than 20% of labour costs in Luxembourg and greater than 15% of labour costs in four other countries: Czech Republic, Germany, Ireland, and Slovenia,” the think-tank says.
The OECD also compared gross wage levels, finding that “the average worker” in Ireland earns €34,847. The average wage in Germany is €47,042; with €46,693 paid in Belgium; €43,484 paid in Austria; while France’s gross wage is €37,792. The Irish gross wage of €34,847 is higher than Italy’s €30,710; the €26,259 paid in Spain; and Portugal’s gross wage of €17,280.
Over the past five years, the labour tax burden has increased in 24 OECD countries and fallen in nine others, said the OECD. It found a slight decrease for the tax wedge in the year in Ireland.
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