The NERI’s Quarterly Economic Facts contains a range of indicators on the public finances. One of these indicators compares government revenue as a percentage of GDP in the EU and the Republic of Ireland. Total general government revenue is largely obtained from taxes and social security contributions but also includes other receipts of public authorities.
Government revenue in the Republic of Ireland was 35.9% of GDP in 2013. As a percentage of GDP this figure was the joint fourth lowest in the entire EU (see chart below). Government revenue as a percentage of GDP averaged 45.7% in the EU28 and 47.1% in the EU15. Lithuania (32.3%), Romania (32.7%) and Latvia were the countries with the lowest levels of government revenue while Denmark (56.2%), Finland (56.0%) and France (52.8%) had the highest levels of government revenue.(A full sized version of the chart is available here ).
In GDP terms the ‘revenue gap’ between the Republic of Ireland and the EU28 was over €16 billion in 2013. As alternatives to GDP we can use Gross National Income (GNI) or Gross National Product (GNP) when comparing the revenue capacity of different countries. However, where using GNI or GNP it is necessary to deduct an estimate for corporate taxes on repatriated profits which appears as part of GDP but not as part of GNI or GNP.
Eurostat’s annual Tax Trends in Europe publication shows us the source of the large difference in government revenue between the Republic of Ireland and the EU28.
The latest available data shows that total taxes (including Social Security Contributions, or SSCs) as a percentage of GDP in 2012 was 28.7% in the Republic of Ireland and 39.4% in the EU28 (weighted average). The Republic of Ireland had the sixth lowest level of taxes (including SSCs) in the EU28 in 2012 but when we exclude the government revenue obtained from SSCs the Republic of Ireland jumps to 14 th in the EU28.
The data shows that over 80% of the revenue gap between the Republic of Ireland and the EU28 is accounted for by the large difference in social contributions as a percentage of GDP. In 2012 social contributions averaged 12.7% of GDP in the EU28 but just 4.4% in the Republic of Ireland. The difference in employer social contributions by itself accounts for over 40% of the revenue gap between the Republic of Ireland and the EU28.