Tax on Irish workers’ wages up 0.3% last year – OECD

Tax on wages earned by workers in Ireland increased by 0.3% in 2021, according to a report from the OECD.

The OECD’s “tax wedge” measures the burden of tax on earned income by including income tax, employer and employee social security contributions and subtracting “family benefits” like child benefit.

Ireland’s tax wedge is the 24th lowest out of 38 OECD countries. This position is unchanged from 2020. Ireland’s tax wedge is 32.7% compared to the OECD average of 34.6%.

In Ireland, income tax and employer PRSI account for 89% of the tax wedge, compared to an OECD average of 77%.

Ireland has a greater than average reduction in the tax wedge when child benefit is included. The reduction in Ireland is 15% compared to the OECD average 10% reduction.

The country’s tax wedge falls further to 32 out of 38 countries when compared taxes for a one income couple with two children on average earnings. This was 19% in 2021, compared to the OECD average of 24.6%.

Between 2009 and 2021, the tax wedge for the average single worker in Ireland rose by 4.2%. However, it is still 1.3% lower than it was in 2000.

On another measure of the tax burden, which strips out employer social security contributions, the rate paid by single Irish workers is higher than the OECD average while the average married worker with two children had take-home pay higher than the OECD average.

The net average tax rate for the average single worker in Ireland was 26.7% compared to the OECD average of 24.6%.

This means the take home pay after tax and benefits was 73.3% of gross wage compared to the OECD average of 75.4%.

For a married worker with two children, the net average tax rate was 10.1% in 2021 compared to the OECD average of 13.1%.

This means the take-home pay after tax and benefits was 89.9% of gross wage compared to the OECD average of 86.9%.