Salary deductions are lowest in EU

The Irish tax and social security burden is the lowest in the EU at only 34.1 per cent of Gross Domestic Product (GDP), according to figures from the European Commission Eurostat service.

Pity the Swedes (at 54 per cent) or the Danes (at 53 per cent) at the top of the league, well above the EU taxation average of 42 per cent of GDP.

Of course, the truth is not quite so simple. As your pocket will tell you if you are a PAYE taxpayer, there are lies, damned lies and statistics.

The good news is that Irish taxes, unlike those in the rest of the EU, are declining as a share in GDP, from 36.7 per cent in 1994 to 34.1 in 1997, compared to an increase in the same period in the EU from 41.9 to 42.6 per cent.

The bad news is that if the more reliable indicator of Irish national wealth, gross national product, is used, the State emerges as a more severe tax collector than Spain, Portugal or the UK.

The figures fail to reflect three other features of the Irish system. On the one hand the far heavier dependency ratio, a product of age structure and large families, means that a smaller proportion of the population carries the tax burden.

That dependency problem is exacerbated by the higher proportion of the tax take from the PAYE sector and the relatively low taxation of the self-employed and of companies.

The figures also do not reflect the fact that benefits to the taxpayer from activity by the State, such as medical or child-care services, are far higher in countries like Sweden than in Ireland, where such costs may nevertheless have to be met from the taxpayer's pocket. The upshot is that, while the State may be the least taxed in the EU, the average taxpayer may be among those who face the heaviest relative tax burden.