Ireland's 'Progressive' Income Tax System

Nat O'Connor16/02/2015

Nat O'Connor: Some commentators keep referring to the progressivity of Ireland's income tax system, as if it was the silver bullet that makes economic inequality in Ireland OK, or at least as good as it can get. This is vastly over-simplified.

Focusing in on the effect of income tax, USC and PRSI, the progressivity in Ireland's income tax system is real - but it is NOT due to taxing high incomes more than in other EU countries.


Progressivity of income taxation is measured (by the OECD) by comparing the tax paid by someone on two-thirds of average earnings with someone on one-and-two-thirds of average earnings.

The OECD reports an average wage for Ireland of €32,381. The average wage in France is €36,980 and in Germany it is €45,170.

Someone on two-thirds of average wages is therefore on €21,695 in Ireland, €24,777 in France and €30,264 in Germany.

At this wage level (based on the tax payable by a single person), the Irish person pays €4,567 in taxes (21.05%), the French person pays €11,293 in taxes (45.58%) and the German pays €20,390 in taxes (45.14%).

Someone on one-and-two-thirds is on €54,076 in Ireland, €61,757 in France and €75,434 in Germany.

The Irish person at this higher salary level pays €20,803 in taxes (38.47%), whereas the French person pays €28,006 in tax (54.11%) and the German pays €38,637 in tax (51.22%).


Data sources: OECD on average wages and OECD on average taxation.

The Irish person on €54,076 pays a lot more tax than the Irish person on €21,695. That's what makes Ireland's income tax system 'progressive'. The jump from paying 21.05% of tax to 38.47% is a jump of 17.42 percentage points.

Tax goes up on higher earners in France and Germany too, but the jump isn't as big. In France, tax on higher earners is 8.53 percentage points more and in Germany it is 6.08 percentage points more.

But the Irish person on one-and-two-thirds of average wages does not pay anything like as much tax as his or her French and German counterparts. There is plenty of scope to increase tax on higher earners. However, providing a comprehensive system of quality public services in Ireland would also require low and middle earners to pay a lot more tax and social insurance too.

Dr Nat O'Connor     @natpolicy

Nat O'Connor

Nat O’Connor is a member of the Institute for Research in Social Sciences (IRiSS) and a Lecturer of Public Policy and Public Management in the School of Criminology, Politics and Social Policy at Ulster University.

Previously Director of TASC, Nat also led the research team in Dublin’s Homeless Agency.

Nat holds a PhD in Political Science from Trinity College Dublin (2008) and an MA in Political Science and Social Policy form the University of Dundee (1998). Nat’s primary research interest is in how research-informed public policy can achieve social justice and human wellbeing. Nat’s work has focused on economic inequality, housing and homelessness, democratic accountability and public policy analysis. His PhD focused on public access to information as part of democratic policy making.


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