Taxes on work in Ireland remain the lowest in the developed economies. Figures from the Organisation for Economic Co-Operation and Development (OECD) published yesterday show that the difference between the total cost of employing a person and their net take home pay is lower in Ireland than in any other member of the group.

For a married single earner on the average wage with two children, the cost to the employer was just 8 per cent higher than net take home pay in Ireland, the OECD said yesterday. The average across the OECD was 27.7 per cent but varies considerably across individual member states.

The highest tax wedges in this category are found in Turkey, at 42.7 per cent and Sweden at 42.1 per cent. After Ireland, the lowest tax wedges are 11 per cent, for Iceland, 11.9 per cent in the US and 11.9 per cent in Poland.

Tax wedges represent the combined effects of personal income tax, employee and employer social security contributions, payroll taxes and cash benefits.

Ireland performed less well for single childless persons. For such persons on the average wage, the tax wedge was 25.7 per cent while for such persons on 67 per cent of the average wage the tax wedge was 19.9 per cent. However Ireland's position was still better than the OECD average for these categories, which were 37.3 per cent and 33.7 per cent, respectively. The latest OECD report says that tax wedges have fallen in developed countries as a result of policy changes. "Countries have been cutting the tax wedge gradually because they are aware these taxes have adverse effects on the labour market," said Christopher Heady, head of the Tax Policy and Statistics Division at the OECD's tax policy centre.

But the path to lower taxation was strewn with difficulties, he said. "Countries are trying to reduce tax on labour but they are having difficulties in doing so as it is a very large part of tax revenues and it is hard to cut expenditure," said Heady.

The tax wedge does not attempt to measure the size of the overall tax burden, but the extent to which income taxes directly affect the incentive of employers to take on extra workers. Personal income taxes accounted for only 28 per cent of total tax receipts in 2005, according to the Department of Finance.

While recommending a broader tax base to ensure greater fairness, the OECD refrained from passing judgment on whether some countries had set taxes, such as the top rate of income tax, too high.

"These countries have made choices about how much should be a matter of state provision and how much should be a matter of private provision. That has been decided by voters," said Heady.

The think tank also added that income tax and social security contributions formed just part of the equation and that some countries with very low income tax rates compensated by levying higher rates on other sources of personal income. - (Additional reporting by Reuters)