A new OECD study estimates that an average couple with two children in Ireland gets more in state transfers such as child benefit than they pay in taxes and PRSI on their incomes.
While families take home around 85.4 per cent of their gross pay on average in OECD countries - when benefits are added in - the study finds that in Ireland the average family has take home pay representing 100.3 per cent of their income. This means that the OECD calculates that for many families here, state payments such as child benefit are greater than the combined cost of income tax and levies and employee’s PRSI.
The figures are based on CSO earnings data . The OECD uses annual earnings of around €35,000 for an employee in its estimates. The figures focus purely on income tax and do not include other payments such as VAT, excises or property taxes.
Overall, total taxes on income in Ireland remain low by international standards, despite the increases of recent years, according to the study. The survey, “Taxing Wages 2016”, measures the so-called “ tax wedge”, which is a measure of the tax take on income including income tax and levies and employee and employer social insurance contributions. It shows that the average tax wedge for a single employee in Ireland is 27.5 per cent of gross income, compared to 35.9 per cent for the 34 OECD countries on average. Ireland ranks as the seventh lowest of the 34 countries measured in terms of the tax wedge on income .
Counting in employers’ PRSI, the total tax wedge on a one-earner married couple with two children stood at 9.5 per cent, compared to an OECD average of 26.7 per cent. The average “ child-related benefits and tax provisions” here were twice as valuable - about 18 per cent of income - than the OECD average.
When employers’ PRSI is excluded the figures showed families actually slightly ahead on average. Also excluding employers’ PRSI , a single worker is found to face an average tax rate of 19.7 per cent, compared with an OECD average of 25.5 per cent.
The study finds that the average tax wedge here for a single worker has fallen from 28.9 per cent in 2000 to 27.7 per cent last year. However there was a large fall between 2000 and 2007, followed by a sharp rise between 2008 and 2014.
