Irish marginal tax rates among the worst in EU study

A study of European barriers to competitiveness shows that although Ireland outperforms its European partners on most fronts its marginal tax rates are among the worst in the EU.

The survey by the European employers' confederation, UNICE, also found that if the working year is divided into time worked for the taxman and time worked for themselves, the average Irish production employee is shown to work until mid-July (close to the EU average) for the taxman, while those in Britain work a full month less for the exchequer.

The survey compares aspects of the European economy affecting competitiveness and benchmarks them against US and Japanese standards. It shows dramatic differences in such areas as the costs of production and labour, tax rates, and the flexibility of labour markets. Addressing such differences, UNICE warns, is the key to dealing with the Union's chronic unemployment crisis.

IBEC's European director, Mr Peter Brennan, welcomed the report which, he said, "reflected the reality that the economy was in "pretty good shape".

Among the benchmarks used in the survey are the rate of transposition of EU single market legislation, rates of R&D, state intervention, taxation of business, dependency ratios, the funding gap for public pensions, total labour costs, ease of hiring and firing, labour force participation rates and rates of higher education.

The survey shows, for example, that costs to industry in the EU are significantly higher than in the US - energy 46 per cent more on average, road freight costs 40 per cent more and long-distance phone call charges are treble the cost.

On virtually all of the standards examined Ireland is among the top performers in the Union, although its record on research, particularly in the field of information technology and communications, is some way down the field.

On marginal tax rates, however, Ireland is among the worst in Europe for every extra pound earned by the average production worker 54p is taken by the taxman compared to 19p in Japan, 30p in the US, and 35p in Britain. Yet for someone on twice the average production wage in Ireland marginal tax falls to 50p in the pound.