The tax burden in the Republic fell last year and tax revenue in the State is at the bottom of the OECD league as a percentage of gross domestic product (GDP), according to new figures. They show tax revenue here was 28 per cent of GDP last year, well below the EU average of 40.5 per cent. Cliff Taylor, Economics Editor reports.

The level of the tax take here has been the subject of much debate. Social campaigners and the trade unions have argued that tax here is now too low to pay for an adequate level of public services and that some increases are required. However many economists say that calculating tax as a percentage of GDP is misleading as GDP in the Republic is inflated by the profits of the multinational sector, the vast bulk of which are repatriated and, therefore, are not available as income.

The OECD figures show that tax as a percentage of GDP fell from 29.9 per cent in 2001 to 28 per cent in 2002. Since 1985, the total has fallen from 35 per cent of GDP.

The data, published yesterday in the OECD Revenue Statistics, do not include an OECD average, as statistics were not available for all countries. The average for 2001 was 36.9 per cent.

A breakdown of yesterday's figures shows that taxes on personal and corporate income also fell last year , coming in at 11.4 per cent of GDP compared to 12.5 per cent the previous year and 13.3 per cent in 1999. Again, the Irish total is well below the EU average of 14.1 per cent.

Bodies such as the Conference of Religious of Ireland have argued that even calculating tax as a percentage of gross national product (GNP) - which subtracts multinational repatriations - the take here at around 34-35 per cent of national output is low by international standards.

The ICTU pre-budget submission, published yesterday, also points to low tax levels, particularly for corporation tax and employers' PRSI.

However, a paper by economists Dr Donal de Buitleir and Mr Pat McArdle, delivered at the recent Kenmare economic conference, disputed this analysis. It said that the tax take here needed not only to be adjusted to take into account the gap between GDP and GNP but also to account for our lower spending needs in areas such as defence, debt servicing and social security.

When these adjustments are made, the paper argued that we should be able to maintain a low overall tax take while still having as much money as other EU countries to spend on providing high-quality public services.