As the Deputy will be aware, a progressive taxation system means that those on higher incomes pay proportionately higher rates of tax on their income than those on lower incomes.
The European Commission compares progressivity of taxation by taking the OECD tax wedge for an individual earning 167% of the average wage and dividing it by the tax wedge for an individual earning 67% of the average wage. On a rating system where less than 100 is regressive and above 100 is progressive, most EU countries have a progressivity rate of between 120 and 140. Ireland, in comparison, has a progressivity rate of 183 for 2013, the latest year for which data is available. This is considerably more progressive than any other EU member of the OECD, and the second most progressive overall. OECD tax data is not readily available for years prior to 2005. Nonetheless, Ireland has had either the most or second most progressive income tax system among OECD member states since 2005. Ireland's progressivity relative to the other OECD member states for this period is set out in the table.
Income Tax Progressivity relative to other OECD States 2005-2013
|
Ireland
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
|
Position
|
2nd
|
1st
|
1st
|
1st
|
1st
|
1st
|
2nd
|
2nd
|
2nd
|
A fair, efficient and competitive income tax system is essential for economic growth and job creation. I have long said that the burden of the income tax system in Ireland is too high and that I would seek to reduce it as soon as it was prudent to do so. The income tax measures introduced in Budget 2015 are the first stage of a three-year plan to progressively reduce the marginal tax rate on low and middle income earners in a manner that maintains the highly progressive nature of the Irish tax system.
All those who currently pay income tax and or USC will see a reduction in their tax bill in 2015.
