News

June 13 2011

Ireland has one of the highest tax burdens for high earners

Research by UHY, the international accounting and consultancy network

Ireland has one of the highest tax burdens for high earners of any major economy, reveals research from UHY, the international accounting and consultancy network.
Ireland is ranked 18th out of 19 countries according to how much tax it takes from high earners wages. The table (below) ranks countries from lowest tax burden first to the highest tax burden last.
UHY studied tax data in 19 countries across its international network, including members of the G8 as well as key emerging economies. Each country was asked to calculate the ‘take home pay’ for low and high income workers taking into account personal taxes and social security contributions.
While Ireland was ranked 18th out of 19 for taxes on high earners, it ranked 2nd out of 18 for taxes on low earners. High earners were defined as workers earning USD$200,000 per annum while low earners were defined as workers earning USD$25,000 per annum.
For a person earning USD$200,000 just one country – the Netherlands – takes more in tax and social security contributions than Ireland. Only Dubai - which does not tax income at all – takes less tax than Ireland from an employee earning USD$25,000.
The G8 countries
Net pay after tax and social security per country in US dollars (from highest to lowest)

 

Alan Farrelly , partner of UHY Farrelly Dawe White Limited, Irish member firm of UHY comments: “While Ireland has kept corporate taxes low to entice multinational businesses, the heavy tax burden on high earners is at odds with that policy. Companies look at personal tax rates when choosing where to locate. If the tax burden is too high, they may struggle to attract the necessary talent.”
“The Government is resistant to the idea of increasing corporate tax rates, but with austerity measures on the horizon it will need to consider whether high earners can shoulder a greater tax burden without damaging the competitiveness of the economy. It is an uncomfortable balancing act.”
“Achieving a more sustainable fiscal position will be difficult without raising taxes, but higher taxes are likely to hinder economic growth. Many high earners will be highly skilled and they are usually very mobile. Ireland risks a brain drain if high earners are taxed significantly more than competitor countries.”
All 19 countries surveyed by UHY
Net pay after tax and social security per country in US dollars (from highest to lowest)

 

For high earners the difference in the amount of tax collected between the highest taxing country (Netherlands) and the lowest taxing (Russia) is USD$62,547, which means that a person earning USD$200,000 per annum in the Netherlands would pay nearly two and a half times (240%) more tax than the equivalent person in Russia.
The UHY research  reveals that (excluding Dubai) for low earners the difference in the amount of tax collected between the highest taxing country (India) and the lowest taxing (Ireland) is USD$5,274, which means that a person earning USD$25,000 per annum in India would pay nearly five times more tax (496%) than the equivalent person in Ireland.
Roisin Duffy, Tax Director of UHY Farrelly Dawe White Limited, Irish member firm of UHY comments: “Low earners in Ireland pay less in tax than any of the countries we studied apart from Dubai. With public sector job cuts biting hard and unemployment around 15%, it is vital that the Government does all it can to make work pay. Fortunately, we are some way ahead of our competitors on this measure.”

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