Ronan Lyons | Personal Website
Ronan Lyons | Personal Website

Paying tax in Ireland: Where the richest (and poorest) pay

  • eamonn moran ,

    “this new system would be brought in along with a Site Value Tax that would shift the burden away from economic recovery) but be significantly fairer, with effective tax rates varying from 20% to 30%.”
    So you would be bringing the effective rate for the top Decile from 37% (including Vat) back to 30%?
    But didn’t you say that this group was saving €65,000 per year already? Why do you want to transfer wealth to this group when they can already afford to save so much? Or did I pick that bit up wrong?

    The Fact the government get back 35% of the welfare paid out to the bottom Decile is also amazing. When we say we give people 188 in weekly dole we rarely mention that the actual cost to the state is closer to €120 a week.

    • Sheila ,

      Interesting, Ronan – can you clarify where you get your figures/calculations for actual tax paid for each of the sylised households?

      • Seamus Coffey ,

        Hi Ronan,

        Interesting piece. I would be surprised if someone in the lowest income decile paid €1,500 of VAT per annum.

        To reach that around in 2011 they would have needed to spend nearly €8,650 on standard rated goods.

        €1,500/.21 = €7,143 which + VAT = €8,643.

        • eamonn moran ,

          Good spot Seamus.

          So the lowest Decile pays 17% (still higher %rate than the 2,3,4 and 5th) And the cost of the €188 dole would not be about €120 but about €156.

          Hi Ronan

          You also say the hightest Decile earn about 155K save 65k and get taxed 62K. Does this mean they only spend 18k?

          • eamonn moran ,

            sorry 28k?

            • Ronan Lyons ,

              Hi Eamonn,
              CSO figures indicate that the typical household in the top decile has a total income of €153,000 (of which €6,000 is in transfers). They pay €37,000 in income tax and a further €16,000 in PRSI/USC. They spend almost €90,000 a year but – as per the ESRI paper – their effective rate of VAT (relative to income) is just 6% so their VAT bill is €10,000.

              CSO HBS figures indicate that the lowest-income households (which presumably include students/borrowers and pensioners/dissavers) are spending €18,000 a year, even though their income include transfers is just €9,000 a year. Their effective rate of VAT (relative to income) is 17%.

              Have a read through the companion post (linked at the top) – figures are from the ESRI publication on the distributional effects of VAT, the Revenue Commissioners and the CSO Household Budget Survey.

              Hope those comments help – thanks for the feedback,


              • Seamus Coffey ,

                Hi Ronan,

                That is very interesting. It seems that income statistics are not providing the full picture. I just had a look at the HBS as you suggested and the inequality in expenditure is far lower than the inequality in income. The composition of those in the lower deciles is very important.

                An expenditure of twice income is quite a difference. That makes a mockery of the little bit of arithmetic I did above.

                Where do they get the money? Savings, nixers, under-declaring income, family transfers etc. I’m off to do some reading. Interesting topic.

                • Dreaded_Estate ,

                  • Laura ,


                    Would love to see the inclusion of mortgage interest relief in some of your figures. Surely this has an enormous impact on real incomes? I did a back of envelope calculation recently and figured out that over 7 years an upper rate tax payer could net 12k in this alone. Thats a lot.

                    One thing I’m curious about though is how the net figures are getting where they are. I pay 37% of my income in income tax and I am not on the top earning rates. Can anybody suggest a better tax advisor?

                    • Laura ,

                      Ok I should have worded that better – I would suggest you look at what happens if you calculate net tax contributions with and without the impact of mortgage interest reliefs.

                      • Three questions on an Irish debt deal | Eamon Ryan ,

                        […] in April 2011 is following that plan and is on target to meet the objectives. As is shown here and here and here, there has been a radical increase in taxation in Ireland, which has been targeted first […]

                        • David Carr ,

                          Could you just clarify the part where you mention the rate on income being above the 50% mental threshold .

                          From what you have illustrated the rate for the top tier is 40%, so why drop it to 36% given the state of the country’s finances. What benefit would it have.

                          • Lies, damn lies and then Union funded statistics - Page 4 ,

                            […] […]

                            • Jack Sullivan ,

                              You say:

                              “But the system is also hugely regressive. Because poorer households have to spend all their income (and then some), and all that spending is liable for VAT, their effective tax rate surpasses all other income groups in the bottom half of the income distribution.”

                              This is not true. A large proportion of spending by poorer households is on food on which there is no VAT or other tax.

                              Leave a comment