Ireland - the lowest tax in the world - Irish Independent

Irish people are always moaning about taxes but a survey shows that the average Irish family pays the lowest taxes on income in the developed world!

Figures from the Paris-based Organisation for Economic Co-Operation and Development (OECD) show the state takes only 8pc of the gross earnings of a one-income family with two children earning the average wage, when the value of state benefits is included.
Higher income earners may be hit harder - but those on average wages were the subject of this survey,

This is just a quarter of the average deduction in the 15 pre-enlargement EU states.

The heaviest taxed EU-15 countries, Belgium, France and Sweden, take five times as much.

Irish taxes have been going up, the figures show. They reached a low of 6.4pc in 2003, when Ireland overtook Iceland in having the lowest labour taxes in the 30-nation OECD.

But this rose to 8.4pc in 2004, before falling again last year, and was still comfortably below Iceland's 11pc.

Single workers do not fare as well. They face deductions of 26pc - more than the state take in New Zealand, Korea and Mexico. But it is still almost half the 42pc EU average.

Even a lower-paid EU single worker on two-thirds of average earnings faces deductions of 38pc. Ireland and New Zealand take 20pc, compared with 27pc in the USA and 30pc in Britain.

The figures are calculated by adding employers' PRSI (natonal insurance) to income tax and employee PRSI (national insurance) , and subtracting the value of payments such as child benefit. They are therefore not the same as income tax deductions, but show how much the employee gets to keep out of the total cost to the employer.

In most of Europe, employers pay much higher insurance deductions than the 10.75pc charged to Irish employers. In many countries, the workers also pay more income tax. It therefore costs an Irish employer less money to offer the same amount of take-home pay.

Many economists believe these low labour taxes help explain Ireland's strong job creation and low unemployment. The difference is made up by Irish indirect taxes, such as VAT and excise duty, which are high by international standards. This helps makes the cost of living higher than elsewhere, but may be less damaging to employment.

"Countries have been cutting this tax wedge gradually, because they are aware these taxes have adverse effects on the labour market," said Christopher Heady, head of the OECD Tax Policy and Statistics Division.

The report says labour taxes have fallen in most countries in recent years, as governments try to get more people into work. However, the need to maintain government revenues means the changes are small. In Britain, the government increased social security contributions for employers and employees to fund an increase in health expenditure and focused its efforts to cut the tax burden on families, the OECD said.

The British tax wedge for a single person without children rose to 33.5pc.