Personal taxes rose most in Ireland last year

PERSONAL TAXES have risen more in Ireland this year than in any other country in the world, according to a new tax survey by accountancy firm KPMG.

The firm’s 2009 individual income tax and social security rate survey shows that the average top rate of personal income tax dropped slightly to 28.9 per cent this year, but that many countries are planning or have already implemented increases to their top rate of tax.

Ireland’s top rate of tax for high-income earners is calculated as 52 per cent, comprising the 41 per cent income rate, the maximum 6 per cent income levy and the 5 per cent health levy. The UK has also announced an increase in the tax rate applied to its highest earners, which will jump from 40 to 50 per cent next year.

“In the current economic environment where countries face increasing budget deficits and need funding for various measures, it is becoming clear that some states are turning to those in the highest income brackets amongst their current tax bases to increase revenue,” said John Bradley, head of KPMG’s international executive services team in Ireland. “Our study has recorded a general decline in top personal income rates over the past seven years, but in 2010 we are seeing indications that a reversal may be on the way,” he said.

The country with the highest top rate of personal income tax and social security is Denmark, at 62.3 per cent. According to the KPMG study, the highest personal income taxes in the world are paid by citizens of European Union members. However, with the introduction of flat rate taxes in a number of Eastern European countries, including Latvia and Poland, the average top rates of tax have fallen from 41.1 per cent in 2003 to 36 per cent in 2009.

Mr Bradley said shifts in personal income tax rates had the potential to influence trends in global workforce mobility.

KPMG has also examined the effective rate of tax paid by employees earning the equivalent of $100,000 (€70,000) and $300,000 (€211,000). It found that the country with the highest effective rates – the proportion of workers’ incomes that is deducted in tax and social security – was Slovenia in both cases, at 54.9 per cent and 60.4 per cent respectively.

The effective rates in Ireland were calculated as 33.8 per cent for the $100,000-earning worker and 43.8 per cent for the $300,000-earning worker.