IMF says Irish tax system is stopping women working

There's a squeeze on middle-income earners, according to a new report...

The International Monetary Fund (IMF) has heavily criticised Ireland's income tax system, saying that it is hurting middle-income earners.

Not only that, it is undermining female participation in the workforce, creating welfare traps and putting skilled foreign workers off coming here.

The Washington-based fund's latest post-programme report stated that the increase in the threshold for the Universal Social Charge (USC) had narrowed the tax base:

"This places a large tax burden on middle-income households, undermines female labour force participation, creates welfare traps for low-skilled worker, and discourages high-skilled worker migration to Ireland."

Donal O'Donovan, Deputy Business Editor for the Irish Independent, told Newstalk Breakfast that the fact the tax system seems to be resulting in the female partner in a two-income household quite often leaving employment is a cause for concern:

"The bad news in that is that what they're saying is that Ireland needs to widen the tax base.

"Minister for Finance Michael Noonan will talk about the number of people being taken out of the tax net at the bottom. The IMF is saying 'stop that, redistribute the tax income so essentially everyone is paying a bit'.

"But also less direct tax. So they're very interested in – and this will be very unpopular – property tax charges, like water tax charges...

"What they're saying is that is necessary and if you don't have that, then what you have is this squeezed middle who end up paying, essentially, a disproportionate amount of tax.

"That has an effect, i.e. fewer women are going out to work. Very well-qualified women, who would otherwise be in the workforce. To counter that, then you need all sorts of other incentives."

Dr Niamh Hourigan, Head of Sociology at UCC, looked at the question of affordable childcare.

"The State in Ireland has conflated what we would call early childhood education with childcare," she said.

"So the major provision for childcare has been the provision of a free preschool year and the extension of that scheme.

"But of course a free preschool year in effect means three hours in the morning which are devoted to what in other countries would be called early childhood education...

"Now that's great, and it's very good for small children. But unfortunately for women in the workforce, that actually isn't going to meet your childcare needs. Childcare then is an additional cost on top of that."

She suggested "flexible working models" as one possible solution to the problem.