Effective tax rates in Ireland

Proinnsias Breathnach: I sent the following letter to the Irish Times in early December, but like my article on competitiveness, it failed to make it onto the page:

In an article in The Irish Times on December 3, Danny McCoy, Director General of IBEC, wrote: “OECD data show that effective tax rates for high-income earners in Ireland are higher than those in many European countries, including Germany, France and the UK.” Mr McCoy suggests that this is undermining Ireland’s ability to attract or retain highly skilled workers.

A table from the OECD website (Table I.5, OECD Tax Database) shows that, for workers earning two thirds more than the national average wage, the proportion of income paid in income tax and employee’s social security in 2008 was as follows: France 33.3%, Germany 45.6% and the UK 30.3%. The comparable figure for Ireland was 26.9% - lower than any of the other 14 countries which made up (with Ireland) the European Union before its recent enlargement.

Of course, Mr McCoy may have had in mind people earning a lot more than two thirds above the average wage. According to the income tax calculator on the parmentier.de website, a single German worker earning €200,000 per year (perhaps typical for a high-flying executive or top scientist) would have expected to take home €105,660 last year after payment of income tax, social security and solidarity surcharge. An Irish worker in the same category would have taken home €5,000 more than this, according to the hookhead.com tax calculator. Again, the effective rate of tax is lower in Ireland.

It may be that the OECD data referred to by Mr McCoy give a different picture, but even if so, the data quoted here indicate that the picture is rather less clearcut than Mr McCoy would have us believe.

Posted in: Inequality • Taxation

Tagged with: highincomeearners • tax rates

Dr Proinnsias Breathnach

Proinnsias Breathnach joined the Geography Department at Maynooth University as its second member in 1972. Officially retired 2010, he remains research active with Emeritus status.

His research interests are economic geography, national and regional economic development, transnational investment, informational economy and dairy cooperatives.