The OECD says Ireland’s tax and welfare system has helped lessen the painful economic effects of the crisis for many.
The report finds a high level of income inequality, made worse because poorly-educated people are more likely to be unemployed than in many OECD countries.
On taxes, the report urges the Government not to abandon the link between the local property tax and house prices, despite the huge surge in property valuations since 2013.
During the property collapse, labour market earnings fell faster for those people on the lowest incomes.
Without the high-level of social transfers, many people in Ireland would slump into poverty.
The OECD says though the welfare system works well in supporting those most in need, it may fall short in providing incentives to those people who have recently returned to work after a long period of unemployment.
“New data compiled for this economic survey shows Ireland’s tax and welfare system has become increasingly more supportive of low- and middle-income households.
“The total amount of social benefits on which tax has been paid has risen significantly as it has been more than doubled as a percentage of disposable income over the past decade,” it said.
It says higher income groups are taxed most, but the effects of redistributive taxes wane for the 1% highest paid. It is important for the Government to maintain credibility in the property tax, says the OECD.
“However, given the sharp upward movement in house prices and the implied large jump in local property tax in 2017, consideration should be giving to phase in the increase in the local property tax over more than one year,” it says.
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