Taxation in the Republic of Ireland

Recreation of the OECD Hierarchy of Taxes which is central to Irish tax policy. Source: Department of Finance (Ireland).[1][2]

Taxation in the Republic of Ireland in 2017 came from Personal Income taxes (40% of Exchequer Tax Revenues, or ETR), and Consumption taxes, being VAT (27% of ETR) and Excise and Customs duties (12% of ETR). Corporation taxes (16% of ETR) represents most of the balance (to 95% of ETR), but Ireland's Corporate Tax System (CT) is a central part of Ireland's economic model. Ireland summarises its taxation policy using the OECD's Hierarchy of Taxes pyramid (see graphic), which emphasises high corporate tax rates as the most harmful types of taxes where economic growth is the objective.[1][2] The balance of Ireland's taxes are Property taxes (<3% of ETR, being Stamp duty and LPT) and Capital taxes (<3% of ETR, being CGT and CAT).[3]

An issue in comparing the Irish tax system to other economies is adjusting for the artificial inflation of Irish GDP by the base erosion and profit shifting (BEPS) tools of U.S. multinationals in Ireland.[4] In 2017, the Central Bank of Ireland replaced Irish GDP with Irish GNI* to remove the distortion; 2017 GDP was 162% of 2017 GNI* (EU–28 2017 GDP was 100% of GNI).[5] Properly adjusted, Ireland's Total Gross Tax[lower-alpha 1]-to-GNI* ratio of 36% is in-line with the EU–28 average (36%), and above the OECD average (33%); Ireland's Exchequer Tax[lower-alpha 1]-to-GNI* ratio of 28%, is in line with the EU–28 average (28%), and the OECD average (27%).[6][7] Within these aggregate taxation metrics, the most distinctive differences between Ireland's taxation system and those of the average EU–28 and OECD taxation systems, are lower net Irish Social Security Contributions (i.e. PRSI less child benefits), offset by higher Irish Corporation tax receipts.[6]

Within Ireland's taxation system, the most distinctive element is the ratio of net Personal Income taxes on higher earners versus lower earners, which is called progressivity. In 2016, the OECD ranked Irish personal taxation as the 2nd most progressive tax system in the OECD, with the top 10% of earners paying 60% of taxes.[8][9][10] The 2018 OCED Taxing Wages study showed Irish average single and average married wage-earners[lower-alpha 2] paid some of the lowest effective employment tax rates in the OECD, with Irish average married wage-earners paying an employee tax rate of 1.2%.[11][12]

In 2018, the Irish Revenue Commissioners disclosed that 80% of 2017 Irish corporate tax was paid by foreign multinationals, and the top 10 multinationals paid 40% of Irish Corporation tax in 2017.[13] Ireland's Corporate tax system is controversial and has drawn labels of Ireland as a tax haven. In June 2017, Ireland's CT system was ranked as one of the world's largest Conduit OFCs (i.e. places that act as links to tax havens),[14] in March 2018 the Financial Stability Forum ranked Ireland as the 3rd largest Shadow Banking OFC,[15] and in June 2018 tax academics calculated that Ireland was the world's largest corporate tax haven.[16][17][18]

Ireland's Property taxes (Stamp duty and LPT) are in line with the EU and OECD averages, but unlike Irish Income taxes, are not overtly progressive.[6]