An economic think-tank for a trade union is looking to put to rest myths about Ireland’s tax system.
The experts contend that Ireland is a low-tax country in which higher wage earners are not paying more than their fair share, according to international standards.
Tom Healy, Director of the Nevin Economic Research Institute, said that conventional thinking in the country is that tax increases are for recessions and tax cuts are commonplace when the Irish economy gets rolling. He said Irish citizens also believe that they all pay too much in taxes (don’t we all!).
“The highly contrived and arcane measure of ‘fiscal space’ is used to concentrate discussion on the equivalent of just a little more than 1 percent of total public spending in any one year,” Healy told the Irish Examiner. “In other words, for every 100 euros of spending on schools, hospitals, roads, teachers … pensions, child benefit, etc., the public debate is concentrated on the one euro of spending at the margin. Even then, the public (is) led down a little pathway of ‘tax cuts’ verses ‘spending increases.’
“That there is a connection between what we spend and what we, as a society, collect through taxation seems to have largely escaped attention. The view universally shared is that ‘I’ pay too much tax or ‘we’ pay too much tax, and ‘they’ ought to pay more or ‘we’ should all pay less and stop throwing money at people on bloated public sector pensions or living off the dole – as the assumed truth goes.”
Healy addressed what he and others at Nevin deem myths around Ireland’s taxation:
- We all pay too much tax – He said that data from the Organization for Economic Co-operation and Development shows that in 2014 a single person with no children earning the average wage in Ireland had the second-lowest tax rate on income among European Union member states.
- The country is not competitive regarding income taxes, especially on average to above-average earners – He said the highest income level used by the OECD was 200 percent of average, 68,356 euros ($77,871 in U.S. dollars) “True, the average effective tax rate moves up sharply from just over 20 percent for a single person in the Republic of Ireland earning 34,178 euros ($38,935 in U.S. dollars) per year to just over 36 percent at an income of 68,356 euros.” Healy said. “At 36 percent, the Republic of Ireland is about midway on the OECD comparison.”
- Providing tax cuts will win over the hearts of lower-paid workers – Healy said Ireland is “way off the chart” regarding taxes paid by individuals below the average wage. He noted single individuals at 50 percent of the average wage are only taxed 3.7 percent in Ireland compared to those same individuals in Denmark being taxed at 35 percent.
- Ireland has the most progressive tax system on the globe – Healy said there are “fairly steep” increases in average tax rates in Ireland from an extremely low 4 percent for workers earning 17,000 euros ($19,366 U.S. dollars) per year to 14 percent for workers at 23,000 euros ($26,201 U.S. dollars). The rate climbs to 20 percent for individuals at 34,000 euros ($38,732 U.S. dollars) and 36 percent for earners of 68,000 euros ($77,465 U.S. dollars).
He said that Ireland is a low-tax country no matter how it is measured, that high-income earner does not pay more than average compared to other OECD countries, and that low earner in Ireland pays far less in taxes than in other countries, “but this is undoubtedly linked to the fact that the Republic of Ireland has a much more unequal distribution of income and a relatively poor social wage.”
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