Sir, – David Madden (September 30th) questions the methodological approach of recent research conducted by myself. That paper estimated the total of income and indirect taxes paid by households across the Irish income distribution.
While measuring tax progressivity is normally assessed versus gross income levels, particularly where income taxes are being examined, as in this research, there is much debate in the research literature on the appropriate base for measuring the progressivity of indirect taxes. As such, the research presents its results as a percentage of gross income, disposable income and total expenditure.
Using all three measures it finds that Ireland has a notably progressive income taxation system; driven in the main by exemptions to income tax for those on low incomes.
In contrast the research reports a regressive indirect taxation system. Taken together, it identifies how much tax households really pay and offers a more comprehensive insight into how and from whom the state collects its taxation revenue.
The taxation system is not just an income taxation system, and we should not lose sight of the fact that all households are taxpayers and that those on the lowest incomes, although exempt from income taxes, still contribute a substantial proportion of their annual income to the State. – Yours, etc,
Dr MICHEÁL COLLINS,
Nevin Economic
Research Institute,
Dublin 1.