Irish middle income workers paying more income tax than EU, US counterparts

Workers earning €55,000 a year are paying on average €800 more

Irish middle income workers paying more income tax than EU, US counterparts

A payslip displaying tax deductions alongside 50 euro notes | Image: Brian Lawless / PA Archive/Press Association Images

Irish middle income workers are paying more income tax than those in Britain, Spain, Sweden, the US and Switzerland.

A new report from the Irish Tax Institute reveals the 'squeezed middle' has been hit with hikes in the last nine budgets in a row.

Workers here earning €55,000 a year are now paying on average €800 more than our UK neighbours.

The 50-page report claims that it is income tax, rather than the Universal Social Charge (USC), which is putting pressure on middle income families.

Irish Tax Institute President Mark Barrett says a coherent and planned approach to Ireland's personal tax system is needed.

Speaking before the launch of the report, he said: "The budget by budget approach to personal taxes over nine consecutive budgets has led to some unintended consequences in the personal tax system and has created peculiar traits across all salary levels; including lower, middle and higher income levels."

Analysis by the institute shows how quickly taxes are rising as you go up the income scale in Ireland.

It says the tax paid rises very progressively as you progress through the salary levels, with the progressivity accelerating from €75,000 onwards in particular.

  • A worker on €25,000 earns almost 1.4 times the salary of a person on €18,000 but pays 5.6 times the tax.
  • A worker on €35,000 earns 1.9 times – but pays 10.9 times the tax
  • A worker on €75,000 earns 4.2 times but pays 44.1 times the tax
  • A worker on €100,000 earns 5.6 times but pays 65.8 times the tax
  • A worker on €120,000 6.7 times pays 83.1 times the tax

At a salary level of €75,000, taxpayers in Ireland are paying rates close to France and they pay over €4,500 more tax than their equivalents in the UK.

As salary levels increase to €100,000, Irish taxpayers are paying rates near those in Sweden.

At €100,000 Ireland ranks ahead of taxpayers in France, Spain and the UK amongst others.

The Institute's report highlights over 50 different tax changes that have impacted Ireland’s personal tax system in the past seven years and had led to 53 moving parts in personal taxes.

Ireland has three different tax charges each with a different entry point and a total of 10 rates, 15 bands and 22 main personal tax credits.

Martin Lamb is chief executive of the Irish Tax Institute. He told Breakfast Business we need a new approach to how workers are taxed.

"You need to look at this over a longer period of time, a medium term, and the Government are saying that as well.

"We recongnise that resources are limited, but we should have a tax system that looked like somebody designed it on purpose - and I don't think we can say that about the tax system at the moment."