Compilation of reports on who pays what tax

The discussion of Irish tax policy is not very often based on hard facts.

There is a perception that high earners pay very little tax and that the so-called "squeezed middle" pay very high taxes.

Yes, a single person does start paying the the top rate of tax at €33,800 but what is the effective rate of tax for someone earning that amount?

Some argue that Ireland is a very low tax country and others argue that it is a high tax country. It's easy to argue either viewpoint by excluding prsi from the argument or by measuring taxes as a percentage of GNP, or GDP if you want them lower.

There is a tendency to select statistics to support one's own argument.

Many of the reports are deliberately misleading e.g. confusing households with individuals.

So I thought it would be useful to compile a list of hard data and reports on who pays what taxes in Ireland.

The fairest and most properly compiled comes from TASC, “an independent progressive think-thank whose core function is economic equality and democratic accountability” published a paper How much tax do people pay on their incomes? Although TASC works closely with the Nevin Institute on many projects, they came up with very different figures from the Nevin Institute. They correctly distinguish between single people and married people. TASC does not shirk from publishing good evidence, even if the evidence is not in their interest.



So, when people argue that someone earning €33,800 pays 51% tax on their income, in fact, it can be seen that a single person earning €32,500 pays an effective rate of tax of 17.9% while a married couple earning €32,500 between them pays 10.4%

Note: See Sophrosyne's critique of these figures at
Tax Institute comparison of Irish income tax rates with other countries

How does this compare with other countries?

The Tax Institute did a comparison. It shows very clearly for single employees, using the theoretical tax rates:

• The lower paid in Ireland pay very little tax compared other countries
  
• The middle paid e.g. someone earning €35,783 pays lowish levels of taxes
• Someone earning around €75,000 pays about the average - not too high or too low
• The higher paid pay higher rates compared to other countries

From Ronan Lyons

Paying tax in Ireland: Where the richest (and poorest) pay


This is misleading for the bottom decile. The average income is €9,500 but their average expenditure is twice that. So of course, the VAT and Excise Duty is going to be a high proportion of their income.

The OECD calculates that the Irish Tax system is the most progressive in the EU. A single person on 67% of the average income pays 11.5% of their income in tax and PRSI, whereas someone on 167% of the average income pays 31.5% of their income in tax and PRSI. This is the highest ratio in the EU.


Progressivity of Irish Income Tax System from Publicpolicy.ie

From the Revenue's [broken link removed]. This shows the Income Tax and USC paid by the different income groups. It does not include PRSI.

My summary:

From Enda Kenny in the Dáil on 20 January 2015

(Presumably these figures are for some year later than 2011?)

The top 1% of earners pay 21% of all income tax and USC, the top 24% of earners pay 80% of all income tax and USC and the bottom 76% of earners pay 20% of all income tax and USC. In addition, the Government has ensured that 410,000 people do not have to pay USC and we intend to increase that number to 500,000 in 2015.

Brendan Burgess said:

From Enda Kenny in the Dáil on 20 January 2015

The top 1% of earners pay 21% of all income tax and USC, the top 24% of earners pay 80% of all income tax and USC and the bottom 76% of earners pay 20% of all income tax and USC. In addition, the Government has ensured that 410,000 people do not have to pay USC and we intend to increase that number to 500,000 in 2015.

Click to expand...

And he said it like it's a good thing... and that's our "right wing" party!

Brendan,
I think you could do the country (and some late night TV viewers) some service by sending these tables to Vinny Browne. He seems convinced that our taxation system discriminates against the lower paid in favour of the higher paid.

Are you serious Conan!!!!! You actually think that VB will let the facts influence his polemic views on most issues!!!

Apologies 44 Brendan,
In a moment of weakness I thought that Vinny was actually a journalist ("fair and balanced" like Fox News). Silly me.

Vincent Browne is not the only one, surely?

Almost all politicians and journalists seem to think that low earners are paying too much tax.

Brendan

Does the average person ever bother to check the veracity of statistics?

Great work on compiling this Brendan. I'd draw a few conclusions.
1) The lower paid pay relatively little in terms of income related taxes, but it is difficult to say whether this is appropriate unless you look at the balance between these taxes, the level of non-income taxes and the level of social benefits (healthcare / social welfare / etc) covered by these taxes
2) We move rapidly from a 'low income tax' economy to a 'high income tax economy' from incomes of €35k to €75k
3) Probably the most absolute thing the data tells us is that those on very high incomes are very highly taxed

one other point from the table above.
There's 100,000 'cases' earning above €100k p.a.
These people (5% of cases) earn €17.5bn (23% of total) and pay €6bn (40% of total) in taxes.

This 'wealthy' group has been repeatedly targetted by left wing groups, despite the fact that couples earning little more than €50k each would be included.

If this group were to pay an extra 5% tax on incomes above €100k (pushing the marginal rate up to a very penal 60% for the self-employed!), it would generate a mere €375m p.a. from my calculations.

Anyone presenting the idea that taxing incomes in excess of €100k amounts to some untapped pot of gold should be called out by these stats.

Great thread
In the public sector, tax rates are significantly higher. Are there estimates for those in the public sector?

As far as possible, I want to keep this thread on authoritative reports on tax rates, rather than on the debates on the rights or wrongs of the issues. Colm has raised a valid point, which deserves its own thread, so I have moved it to here:
Public sector employees pay higher taxes than private sector employees

I think it is also important to note that of the 2,049,617 cases mentioned in Revenue’s table IDS20 above, only 1,223,910 cases were effectively liable to income tax for 2011 - Revenue table IDS17


825,707 (40.29%) were exempt

32,830 (1.60%) were entitled to marginal relief

836,149 (40.8%) 20% tax band*

354,931 (17.32%) 41% tax band


* The figures at the 20% income tax rate include taxpayers whose nominal liability at 41% is fully covered by their tax credits.

New OECD data on income tax paid across countries:

http://www.oecd.org/tax/oecd-tax-burdens-on-wages-rising-without-tax-rate-increases.htm

http://www.oecd.org/tax/taxing-wages-20725124.htm

The "tax wedge" on an average single worker ranges from 10-55% across the OECD.

The average is 36% of labour cost.

Irl, as expected, is below average, at just over 30%.

According to the latest income distribution statistics from Revenue (2012) the number of tax cases increased from 2,049,617 in 2011 to 2,107,208, an increase of 57,591 cases.

By far and away, the largest case increase (12,014 or 20.86%) was in the €10,000 or less income band.

The next largest, with exactly the same case increase (4,626 or 8.03%) were in the €30,000 - €35,000 and €50,000 to €60,000 income bands respectively.