Low income worker? Ireland has smallest tax burden for low paid

Budget 2019: Person on €18,000 pays effective rate of 3%


Ireland is one of the best places in the developed world for a low income worker to pay taxes, new figures show. Someone earning €18,000 a year pays an effective tax rate of less than 3 per cent in Ireland, according to the Irish Tax Institute. This compares with a rate of 26 per cent in Germany.

However, as income levels rise, Irish taxpayers quickly move up the table.

Ahead of Budget 2019, figures compiled for the Irish Tax Institute by KPMG, show that a worker earning an annual salary of €18,000 will give up just €480 a year in tax, including USC and PRSI . This equates to an effective tax rate of less than 3 per cent, and is the lowest amount of tax taken among eight western countries studied.

Tax bill

A worker on the same income in Germany will lose €4,679 of their €18,000 income in taxes, while, in France, the tax bill would be €3,886.

Even low tax countries, such as Singapore, exert a higher burden on their low paid workers, taking €3,619 on an €18,000 annual income there. Even in the UK, workers earning €18,000 pay almost €2,000 a year in taxes.

However, as income levels rise, Irish taxpayers quickly move up the table, with “middle income” earners – those on earnings of between €45,000 and €75,000 – ranked fourth highest across the eight countries, with a marginal rate of 48.75 per cent kicking in on salaries above €34,550.

This compares with a rate of 30 per cent in France and 20 per cent in the UK on a similar income.

High income earners fare worse; Irish workers on salaries of between €100,000 and €150,000 have the third highest tax burden across the eight countries compared. A worker on €150,000 pays €64,801 in tax, PRSI and USC. As a comparison, in Singapore, someone on that income would be taxed just €25,056. Singapore’s system is regressive as a low paid worker pays an effective tax rate of 20 per cent while their highly paid counterpart enjoys a rate of just 16.7 per cent.

PAYE tapering

Higher paid workers could see their tax burden rise if proposals to withdraw the PAYE tax credit were realised. If the 8.25 per cent taper were applied to income of between €100–€120,000, for example, someone earning €110,000 would end up paying tax at a rate of 60.25 per cent on some of their income.

According to the Irish Tax Institute, this could propel Ireland to being the country with the second largest tax burden on high paid earners in the survey.