In this paper we consider revenue sufficiency in the Republic of Ireland. In particular, we compare aggregate taxation in the Republic with aggregate taxation in the ten other European Union (EU) countries with GDP per capita in excess of €30,000.
This is done across three broad categories of tax revenue, namely, labour taxes (which includes social contributions), consumption taxes and capital taxes. We also compare taxes across a number of subcategories. In order to avoid problems and distortions associated with the use of GDP as a denominator, we also compare revenue raised per person in the Republic with per capita revenue in the other high-income EU countries.
In aggregate, we find that the Republic raises significantly less in revenue (€8.1 billion) than it would if per capita taxes and social contributions were at the population weighted peer country average. The difference between the Republic (€13,196) and the peer country weighted average (€14,953) in 2015 was €1,757 per person. The Republic’s revenue deficit is particularly notable in the area of taxes on labour, where there is an aggregate deficit of €9 billion. Employer social contributions account for €6.4 billion of the Republic’s revenue deficit or 79 per cent of the total. On the other hand, per capita taxes on consumption in the Republic are higher than the peer country average with an excess of receipts of close to €1 billion overall.
The excess of consumption receipts is caused by the high level of revenues from excise taxes. Finally, per capita taxes on capital are close to the peer country average with the Republic taking in €0.1 billion less than the comparator average. Decomposing capital taxes, we find that the Republic has comparatively high per capita corporate tax receipts but a deficit under the category of ‘taxes on stocks of capital’ of €1.3 billion – this is mainly related to the low level of property taxes in the Republic. In conclusion we find no evidence that the Republic of Ireland is a high tax country when taxes are considered in aggregate. In fact, per capita receipts from taxes and social contributions are lower than in every other high-income EU country.