Irish employees continue to pay the lowest direct tax in Europe, a recent survey from Deloitte has indicated.
When employee tax and insurance costs as a proportion of the total remuneration paid are taken into account, Ireland continues to have the lowest level at 6.34 per cent.
"This confirms Ireland as a low-tax jurisdiction for employees," the survey says.
However, the survey confirms that Ireland remains expensive from an employer's perspective.
When employer social insurance costs as a percentage of remuneration are calculated, Ireland is in fifth-highest position.
Denmark has the lowest percentage at 1.36 per cent. Ireland, at 9.71 per cent, is slightly more expensive for employers than Cyprus, Malta and the UK, which have percentages at around 9.1 per cent.
Comparing the costs of tax and employee and employer social insurance costs with the total cost of employment, Ireland post-Budget is found to have the lowest percentage cost, according to the survey.
"This was only a marginal advantage in 2005, but the gap between Ireland and Cyprus has increased to 1.44 per cent. Malta and Luxembourg continue to be third and fourth respectively," said Deloitte.
Ireland is ranked 15th out 24 countries surveyed for employee remuneration with an average remuneration cost of €36,852, a rise of 5.3 per cent on the 2005 figure of €34,997.
"The survey shows the continued commitment of the Irish Government to keep the tax and social welfare costs down and hence keep the costs of employment down," said Pat Cullen, tax partner with Deloitte.
"However, Ireland continues to be exposed to pressures from eastern Europe where employment costs are still relatively low. As those economies gather pace and start to compete more effectively for international mobile investment, Ireland will be at a considerable disadvantage."
The Deloitte survey of employee remuneration in enterprises with 10 or more employees shows a wide divergence in remuneration levels and social security costs in 24 of the 25 EU member states.
It highlights that a wide gap still exists in the remuneration levels of EU member states that joined in May 2004 and the original 15 members.
According to the survey, Lithuania has the lowest remuneration costs at just over €5,100. Estonia and Slovenia are not far behind with remuneration levels of €9,216 and €9,264. However, these figures represent a considerable increase over the figures for 2005, which were €7,466 and €8,321 respectively.
Even with wages increasing in the new accession states, Ireland must continue to pursue a competitive tax strategy if it is to compete for jobs, according to Mr Cullen. A positive aspect of the recent Budget is that for the second year in a row it has not added to the total cost of employment, while at the same time reducing the total tax on the employee by €530, Deloitte said.
"The challenge for Ireland Inc is to effectively promote the added value that Ireland has to offer through its location, other taxation measures and experienced workforce so that it continues to attract sustainable investment to ensure its economic growth," said Mr Cullen.
