Average workers are reaching a tipping point over the amount of tax they can pay, experts have said.
With VAT going up 2% in next month’s budget, the Irish Tax Institute has warned the Government that consumers are running out of room to keep giving to the exchequer.
In the last three years, families have seen take-home pay collapse by anything up to €613 after income tax rises, new levies, child benefit cuts, health insurance hikes and the abolition of childcare supplements are all measured.
Bernard Doherty, president of the Irish Tax Institute, said there had been a dramatic impact on people’s ability to pay in just four budgets.
“The capacity for people to bear more pain is running out as we approach an overall tipping point in terms of the money that can be taken from them in tax,” he said.
“We welcome the minister’s commitment not to touch income taxes which would damage employment and the economy; however there is no doubt that €1.6bn in tax adjustments next year would still be felt by Irish taxpayers at an individual level.”
The institute has offered in-depth analysis on how a selection of average family incomes have been hit since 2008.
:: A single worker on the average industrial wage of €35,000 is €157 worse off, while someone earning €75,000 is down €405.
:: A one wage couple with two children on €35,000 are €423 or 16% worse off, while a similar couple on €55,000 lost €283 and those on €75,000 – down €428.
:: A married couple with two children and both working on average wages – a drop of €315.
:: On top of the income tax and levies, child benefit for the parents of two children has been cut by €52 and the childcare supplement of €183 has been wiped out.
The Irish Tax Institute also warned that losses soar to €613 for average earners with children when child benefit cuts, childcare allowances and general living expenses such as commuting costs are factored in.
Most of their assessments on wages do not factor in reduced tax relief on medical bills and increased health insurance costs, the report said.
Mr Doherty said it was vital that the Government looked at an ambitious tax strategy that supported indigenous Irish businesses, job creation and drove the domestic economy.
“The only real solution for increasing taxes is to broaden the tax base through job creation,” he said.
“We need an ambitious tax strategy that supports Irish indigenous business, drives sales and exports and creates the major employers of the future.”
The report found that in just over three years and four budgets, income tax had increased, while five new taxes including the income levy, as it was first known, and now the universal social charge, the pension levy, the €200 second home levy, carbon tax and the expected flat-rate €100 household charge had been introduced.
The group stated that new taxes had brought in €4.8bn over the last three years and another €4.65bn was being targeted over the next four budgets, starting next month.
The institute is now forecasting income tax take this year will exceed 2008, the last days of the boom, and will be the highest on record, beating 2007, despite unemployment tripling since then.
The total income tax take has soared from €13.5bn in 2007 to an estimated €14.1bn this year.