Irish taxpayers among least taxed, says OECD

Irish citizens pay proportionately less income tax and social insurance than those in almost any other country in the developed…

Irish citizens pay proportionately less income tax and social insurance than those in almost any other country in the developed world, according to a study published today by the OECD.

The study into tax and wage rates in the 30 most developed countries finds that the tax burden - income tax and social insurance contributions less cash transfers - on the average Irish wage amounted to 23.8 per cent in 2004.

Only Mexico with 15.4 per cent, South Korea with 16.6 per cent and New Zealand with 20.7 per cent paid lower direct taxes.

The survey prepared by the Paris-based think tank also shows that the tax burden in Ireland has fallen steadily since 1996 when the burden was calculated at 36.1 per cent of the average wage.

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The report does not include corporate tax rates stamp duties or consumption taxes which have become more favoured revenue sources in recent years.

In Greece, Ireland, Japan, Korea, Mexico, Portugal, and Spain the personal average tax rate was below 20 per cent, the OECD report found.

Average earners in Australia, Iceland and New Zealand essentially pay only income tax while their counterpart in Greece is paying almost only social security contributions.

The report highlights the sharp divergence in tax policies across the OECD most notably in the burden paid by the share in tax paid by workers and employers known as the tax wedge.

Employers pay 28.2 per cent of total labour costs in social security contributions in France, 26.9 per cent in Hungary, 26.3 per cent in the Slovak Republic, and 25.9 per cent in the Czech Republic.

In contrast, employers in New Zealand are not subject to these levies, while in Denmark employer contributions are negligible.

As a percentage of labour costs, the total of employee and employer social security contributions exceed 25 per cent in half of the OECD countries. They exceed one-third of total labour costs in ten OECD countries: Austria, Belgium, the Czech Republic, France, Germany, Greece, Hungary, Netherlands, Poland and the Slovak Republic.

This result is not surprising given that the social security contribution revenues in these countries amounted to more than 25 per cent of their GDP.