Families among the least taxed in world as single people left with burden – OECD
MARRIED couples with children in this country are among the least taxed workers in the developed world.
But single workers with no children are bearing the brunt of the personal tax load, according to the Organisation for Economic Co-operation and Development (OECD).
The Paris-based think-tank has found that one-income families with two children end up paying just 1.2pc of their income in tax, once child benefit is factored in. This means that an averagely paid worker here, with children, takes home 98.8pc of their gross wages.
This is after income tax, the universal social contribution (USC) and pay-related social insurance social security contributions are subtracted from gross wages, but child benefit is added in. This is one of the lowest personal tax burdens in the 35 OECD countries.
Experts at the think-tank calculate the net personal average tax rate, or the amount of tax and social contributions deducted, as well as taking in cash benefits received, such as child benefit.
The study looked at one-income families on the average wage of €36,358. But a huge gap has opened up between families with children and single earners who do not have dependants.
The study finds that there is a “fiscal preference” for families in the income tax and social welfare system.
It found that a single worker earning the average wage ends up seeing 19.4pc of their income taken in taxes and social insurance payments, compared with
1.2pc for the one-income family with children.
This is the third lowest of the
35 countries surveyed by the economists in the OECD.
Wedge
The lowest personal tax imposition for families was in Poland, with Ireland in line with Canada and the Czech Republic, according to ‘Taxing Wages 2018’.
The study states: “Ireland had the 31st lowest tax wedge in the OECD for an average married worker with two children at 10.8pc in 2017, which compares with the OECD average of 26.1pc. The country occupied the 33rd lowest position in 2016.”
Economists at the OECD measured what they call the tax wedge, which is the difference between a worker’s take-home pay and what it costs the employer to keep them in a job.
High tax wedges are seen as discouraging employers taking on extra staff, as well as stopping people moving from welfare to work.
Despite having one of the lowest tax burdens on one-income families, when child benefit is included, the study also found that the personal tax burden for these families rose last year.
And the rise was one of the largest increases anywhere, at 2.9 percentage points. This is in spite of the Government trumpeting income tax cuts in the past few budgets in an effort to counter the massive tax rises during the austerity years.
Pay growth is accelerating, but the average worker now pays €5,000 more in personal tax (income tax, USC, PRSI) than a decade ago. This includes income tax, the USC and pay related social insurance.
People in jobs and those paying taxes on pensions are now shelling out €5bn a year extra in income tax alone since the boom.
There have been at least 17 income tax changes, and a raft of new levies and charges.