LOW TAX EFFICIENCY AND SUCCESS IN IRELAND

“The survey shows the continued commitment of the Irish Government to keep the tax and social welfare costs down and hence keep the costs of employment down. However, Ireland continues to be exposed to pressures from eastern Europe where employment costs are still relatively low. As those economies gather pace and start to compete more effectively for international mobile investment, Ireland will be at a considerable disadvantage. While it is unrealistic to expect Ireland to be able to close the gap in remuneration levels, the challenge for Ireland Inc is to effectively promote the added value that Ireland has to offer through its location, other taxation measures and experienced workforce so that it continues to attract sustainable investment to ensure its economic growth.”
- Pat Cullen, Deloitte Tax Partner

A new survey by Deloitte of employee remuneration costs in enterprises with 10 or more employees shows a wide divergence in average remuneration levels and social security costs in 24 of the 25 EU member states. In the survey, we can see that Lithuania has the lowest proportion of the remuneration costs at just EUR 5,100. Estonia and also Slovenia are not very far behind. The level of remuneration's cost proportion stands at EUR 9,216 and EUR 9,264. These figures consideranly increased since 2005. In Estonia, the remuneration costs increased by 23,4 percent while in Slovenia the level of the remuneration costs also increased by little more than 10 percent.

Ireland was ranked 15th out of 24 countries taken under consideration. The average level of the remuneration costs was EUR 36,852. Compared to 2005, the whole cost level increased by 5,3 percent. There is also another very positive aspect in Ireland's case. On average, the total cost of employment did not increase while total tax burden on employee has shrinked by EUR 530. In comparing relative changes in the position of the countries, Ireland still has the lowest cost tax and insurance costs measured as a proportion of the total remuneration paid. Ireland thus continues to have the lowest level at 6,34 percent, Cyprus is in second place with total cost proportion at 8,77 percent. This clearly confirms that Ireland has one a favorable tax climate for employees.


When it comes to comparing employer's social insurance costs measured as the percentage of the total remuneration, Ireland is in 5th position while, surprisingly, Denmark is in 1st position with the lowest percentage at 1,36 percent. Ireland, at 9,71 percent is just behind Cyprus, Malta and the UK which percentages approximately equal 9,1 percent. There is also a significant impact of tax friendly legislation, coded upon stimultaneously low tax rates on corporate and individual income, on economic growth and tax revenue flow. According to international comparisions. statistical brief shows that in the past decade tax revenues soured as economic growth has started skyrocketing. This particular kind of behavior valiantly denies arguments of those who oppose reduction in corporate and personal income tax rates.

Comparing the combined costs of tax and employee and employer social insurance costs with the total cost of employment, Ireland is found to have the lowest overall percentage costs. Despite being a marginal advantage, the gap between Ireland and Cyprus has increased to 1,44 percent. Malta and Luxembourg continue to occupy third places respectively.