Workers paying more tax than 10 years ago, says Tax Institute

Workers in Ireland are paying more tax than they did 10 years ago when the economy crashed despite repeated Government pledges to lower the burden, the Irish Tax Institute has claimed.

In a pre-budget report, the institute said workers across all income levels were paying more personal tax (income tax, universal social charge and PRSI combined) despite a programme of reductions over the past seven years.

These include three increases to the USC entry point, 11 USC rate reductions, six USC band widenings, two increases in the entry point into the top rate of income tax, currently at 40 per cent, and a one percentage point decrease in that top rate.

The institute’s report showed the net pay of single-income earners on €35,000 a year is down 3 per cent or €964 compared with 2008, while those on €120,000 are down 9 per cent or €6,679.

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Families on €35,000 with two incomes, meanwhile, are 3 per cent or €1,928 worse off, while families with two incomes totalling €75,000 take home 5 per cent less, or €5,590.

Self-employed

The institute also said that the benefit of USC reductions was not passed on to all taxpayers, as a new 8 per cent USC rate was introduced on PAYE income over €70,044 and a new 11 per cent rate was introduced on self-employed income over €100,000.

The employee PRSI ceiling of €75,036 was also abolished during that period, increasing the PRSI bill for income earners over that salary level.

Taoiseach Leo Varadkar and Minister for Finance Paschal Donohoe have repeatedly said that reducing the tax burden for workers was one of the central objectives of the Government. But the institute suggested the tax code in Ireland was still highly weighted against middle-income earners.

It said the impact on net pay as salaries rise reflected the “highly progressive” nature of the State’s personal tax code, while noting the big driver of progressivity between 2012 and 2018 was USC.

It said a person on €75,000 used to pay almost eight times the USC of someone on €18,000 in 2012: now they pay almost 17 times the lower rate.

A worker earning €75,000, meanwhile, used to pay 2.6 times the USC of someone on €35,000 in 2012. Now, it is 3.2 times that amount.

In its report, the institute says the top 26 per cent of income earners here – those on incomes above €50,000 – pay the lion’s share (85 per cent) of all income tax and USC. The balance, almost three-quarters of all income earners, pay just 15 per cent of income tax and USC collected.

Mr Donohoe has pledged to cut income tax in next month’s October while indicating the reductions would be modest.

Without raising tax elsewhere, he has roughly €800 million for new tax and spending measures, which when split on a two-to-one basis in favour of spending, leaves barely €300 million for income tax reductions.

He said last week that the budget-day package would be dictated by September’s exchequer returns and a final assessment of how the economy is performing.