Ireland's total tax-take is among the lowest in the EU

Ireland’s total tax-take is far below the EU average according to statistics published June 28, 2010 by Eurostat, the EU’s statistical agency. This publication shows that across the EU the total tax-take averaged 39.3% of GDP in 2008. For Ireland the comparable figure is 29.3%. This raises two major questions for Ireland:

• Why the Irish government insisted in Budget 2010 that the total €4bn in adjustments had to be done by cuts in expenditure rather than making part of the adjustment by increasing the total tax-take as recommended by Social Justice Ireland.
• Why the Department of Finance continues to over-state Ireland’s total tax-take; the Department claims that Ireland’s total tax-take for 2008 was 30.8% of GDP while the correct figure is now seen to be 29.3%. These new EU statistics vindicate Social Justice Ireland which has consistently maintained that the Department has over-stated the total tax-take in Ireland.

The overall tax-to-GDP ratio measures the tax burden as the total amount of taxes and compulsory actual social security contributions as a percentage of GDP.

The overall tax-to-GDP ratio in the EU272 was 39.3% in 2008, the first year of the economic and financial crisis, compared with 39.7% in 2007. The EU27 tax ratio was 40.6% in 2000, fell to 38.9% in 2004 and then rose until 2007.

The overall tax-take in the euro area (16 countries) fell to 39.7% in 2008 compared with 40.4% in 2007. Since 2000, taxes in the euro area have followed a similar trend to the EU27, although at a slightly higher level.

The countries with the lowest total tax-take in 2008 were Romania (28.0%), Latvia (28.9%), Slovakia (29.1%) andIreland (29.3%). These are in marked contrast with the countries that had the highest tax-take i.e. Denmark(48.2%) and Sweden (47.1%).

This information comes from the 2010 edition of the publication Taxation trends in the European Unionissued by Eurostat, the statistical office of the European Union and the Commission’s Directorate-General for Taxation and Customs Union. This publication compiles tax indicators in a harmonised framework based on the European System of Accounts (ESA 95), allowing accurate comparison of the tax systems and tax policies between EU Member States.

Labour taxes – Ireland at the lower end of the spectrum

The largest source of tax revenue in the EU27 is labour taxes, representing over 40% of total tax receipts, followed by consumption taxes at roughly one quarter and taxes on capital at just over one fifth.

The average implicit tax rate on labour, a broad measure of the tax burden falling on work income, was almost unchanged in the EU27 at 34.2% in 2008 compared with 34.3% in 2007, after having declined from 35.8% in 2000. Among the Member States, the implicit tax rate on labour ranged in 2008 from 20.2% in Malta, 24.5% in Cyprusand 24.6% in Ireland at the lower end of the spectrumto 42.8% in Italy, 42.6% in Belgium and 42.4% inHungary at the upper end.

Capital Taxes – Ireland at the lower end of the spectrum

In the EU27, the average implicit tax rate on capital for the Member States for which data are available was 26.1% in 2008 compared with 26.8% in 2007. The lowest implicit tax rates on capital were recorded in Estonia (10.7%),Lithuania (12.4%) and Ireland (15.7%), and the highest in the United Kingdom (45.9%), Denmark (43.1%) andFrance (38.8%).

Corporate Taxes - Ireland at the lower end of the spectrum

Corporate tax rates in the EU27 continued their declining trend in 2010.The highest statutory tax rates on 2010 corporate income are recorded in Malta (35.0%), France (34.4%) and Belgium (34.0%), and the lowest in Bulgaria and Cyprus (both 10.0%) and Ireland (12.5%).