The level of social transfers in the Republic is close to the lowest in the OECD countries, according to a report published yesterday. The report also found that tax as a percentage of gross domestic product (GDP) rose more steeply in the Republic than in any other OECD country in 2004.
The latest OECD annual Tax Revenue Trends report found that the level of social transfers in the Republic, as a percentage of GDP, ranked 27th of the 30 countries surveyed. Social transfers are the redistribution of wealth through benefits such as welfare or pension payments. The percentage for the Republic was 15.8, while that of Sweden, where transfers were highest, was 31.3.
The lowest level of transfers was in Korea, which scored 5.4 per cent. The figures are for 2003.
The report said the tax ratio (tax to GDP ratio) in the OECD area as a whole rose in 2004, reversing the decline recorded a year earlier. "The tax ratio rose most steeply in Ireland (1.4 points)," the report said.
Tax ratios in Belgium, Denmark and Sweden were 45 per cent or more while Japan, Korea, Switzerland and the US had ratios in the 20 to 30 per cent range. The Republic's score in 2004 was 30.1. The provisional ratio for the Republic for 2005 is 30.5, according to the report. The OECD average in 2004 was 35.9, while the EU average was 38.8.
The 2004 ratio put Ireland near the bottom of the table of 30 countries, with just five having a lower ratio. The lowest was Mexico, with a ratio of 19. The highest was Denmark, with a ratio of 48.8.
In a statement, the OECD said tax revenues as a percentage of GDP were rising in many countries despite deep cuts in rates. This was a reflection of economic growth, leading to higher corporate profits, and moves in some countries to broaden the tax base and improve tax compliance.
The report said the main factor behind differing ratios of tax to GDP was the extent to which governments provided public services and the generosity of its social transfer system.
However, the ratios could also be affected by the extent to which governments achieved objectives by way of tax reliefs or social transfers, and the extent to which social transfers were taxed. A breakdown into tax categories found that Irish taxes on personal income and profits, as a percentage of total taxation, rose to 27.4 per cent in 2004, from 26.5 per cent. The OECD average was 24.6 per cent.
Taxes on corporate income as a percentage of total taxation were 11.9 per cent in 2004, down from 12.9 per cent a year earlier. The 2004 OECD average was 9.6 per cent and the EU average was 8.2 per cent.
Taxes on property were 6.9 per cent of total taxation in 2004, compared to the EU average of 4.7 per cent and the OECD average of 5.6 per cent. The Irish figure has increased steadily since 1985, when it was 4 per cent.
