Irish workers pay less than the OECD average tax on wages

Apr 30, 2018

Workers in OECD countries paid just over a quarter of their gross wages in tax on average in 2017 according to the OECD’s annual Taxing Wages 2018 report.  Irish workers paid less tax than the OECD average coming in at 19.2 percent while income tax plus employee social security contributions as percentage of gross wage earnings in the UK was 23.4 percent for 2017. 

The OECD report shows that taxes on labour income for the average worker across the OECD continued the annual trend to reflect a decrease in 2017, dropping to 35.9 percent of labour costs. Ireland has a tax wedge at 27.2 percent while the UK has a tax wedge of 30.9 percent. The tax wedge measures the difference between the labour costs to the employer and the corresponding net take-home pay of the employee.

The tax wedge for a one-earner married couple with two children and a single individual without children varied widely across OECD countries in 2017.  The size of the tax wedge for a family is generally lower than the one observed for the individual without children because many OECD countries provide a fiscal benefit to families with children.

Another interesting measure reflected in the OECD’s report is the net personal average tax rate (NPATR) which is defined as the sum of personal income tax and employee social security contributions minus cash benefits as a percentage of gross wage earnings. The OECD average NPATR for single-earner families with children was 14 percent in 2017.  Ireland had one of the lowest NPRATRs across the OECD at 1.2 percent while the UK’s net personal average tax rate was 18.1 percent for 2017.