Ireland's Tax Burden Aligns with OECD Average, but Progressivity Stands Out

Ireland's average tax take from wages, including income tax and PRSI, is 25.1%, aligning with the OECD average for a single employee earning around €60,000. While the income tax and Universal Social Charge (USC) for a typical single employee are higher at 21% (OECD average: 15.5%), social insurance payments are lower at 4.1% (OECD average: 9.6%).

The Irish system is notably progressive. Families, especially at lower-to-average income levels, are treated generously; a one-income family with two children has a net average tax rate of 10%, compared to the OECD average of 14.7%. However, at higher income levels, the generosity decreases, with a two-earner couple on €135,000 paying 17.4%, close to the OECD average of 18.9%.

For single individuals, those earning around €40,000 pay 16.1% in tax and PRSI, significantly below the OECD average of 20.7%. Conversely, a single employee earning about €90,000 pays 35.4%, exceeding the OECD average of just over 30%. Ireland's marginal tax rates are high, reaching 52% for many when USC and PRSI are included, compared to the OECD average of around 40% for above-average earners.

The overall tax wedge (employer and employee payments) for an average single worker is 33%, slightly below the OECD average of 35% due to lower employer social security charges. Future budget changes are expected to involve adjustments to tax bands and credits for inflation, with a potential focus on the €44,000 threshold for the 40% income tax rate. Widening Ireland's narrow tax base, where the top 10% of earners pay two-thirds of all income tax, remains a challenge.