COMMENTS BY FORMER Taoiseach Leo Varadkar about who pays for and who gets more from services in Ireland have caused controversy over the past week.

“People in rural Ireland are very quick to tell people in urban Ireland that ‘we’re the real workers, we’re the ones paying all the bills, we’re the ones feeding the country’,” he told Matt Cooper’s Path to Power podcast, released on 18 April.

“I think we maybe need to be a little bit more blunt in urban Ireland and say actually, that’s not the case. We’re the ones paying all the bills and you’re the ones in receipt of a lot of subsidies and a lot of tax benefits that other people don’t get.”

Since the episode of the podcast aired, commentators condemned the comments as divisive, speculated on the amount of cows the former Taoiseach would be able to milk, and in the case of one MEP, mounted a maths-heavy defence of farmers.

Varadkar apologised for his comments this week, saying that he had overstated his case in an apology was, in turn, also criticised.

But what about the question he raised: do the taxes raised in Ireland’s urban areas “pay the bills” of the rest of the country?

‘Rural’ Ireland

Firstly, it is worth analysing what exactly “rural” Ireland is.

A publication by the Central Statistics Office, released on 21 April, shows that more than 63 percent of the Irish population live in urban areas, including cities and towns. Another 15.9 percent live in “rural areas with moderate urban influence”.

The CSO’s data shows that there is no county in Ireland which does not have an urban population. The county with the lowest proportion of urban dwellers appears to be Leitrim at 15.9 percent, though some of these people may casually describe themselves to be living in “rural Ireland”.

Some of the commentary around Varadkar’s statements seems to imply that rural Ireland consists solely of farmers and farms.

A 2023 survey of farms from the CSO puts the total number of farm workers at 299,700 – this is about 10 percent of the workers in the country – and almost half of these said farming was not their sole profession.

Farming’s contribution to the rural economy is even less pronounced. If we look at it in terms of Gross Value Added. Gross Value Added (or GVA) is the value of outputs minus the cost of inputs. Or, in simpler terms, the money made overall.

Agriculture makes up just 4.3 percent of GVA in the midlands.

It is lower everywhere else in the country, and zero in the Dublin region.

Even just in areas that are categorised as “highly rural/remote”, farming makes up just 10.4 percent of earned income. 

So in terms of people, most workers in rural Ireland don’t work in farms, and almost half of those who do farm work also work elsewhere.

In terms of economics, there is no region where “agriculture, forestry and fishing” creates more money than industry, or ”professional, admin & support services”.

In short, we should not conflate “rural” Ireland with farmers, nor the “rural” economy with farming.

Another interpretation of “rural Ireland” might be that it refers to anywhere outside Dublin. This is obviously inaccurate. According to the CSO, about half the urban dwellers in Ireland are not in Dublin, and are in Cities like Cork and Limerick, or towns. Besides, parts of county Dublin are rural.

However, publicly available data is often so vague that for some measures we can only look at data in county levels or larger. In these cases, Dublin is effectively a proxy for “urban”.

It’s not clear exactly where the line should be drawn between “urban” and “rural” Ireland in general. We try to use the most granular data we can, though often that just means measuring the most extremes, such as comparing Dublin to the border and midlands. 

So, what does the data say?

Tax data

Who pays more in taxes: urban areas or rural areas?

The best source for information on this is the Revenue Commissioners, who publish detailed tax data by year and geographic area.

Unfortunately, the geographic areas they use are counties, which tells us next to nothing.

For example, we know from this data set that in 2024, €2.3 billion was collected in Co Galway. But we know nothing of how much of that was in Galway city versus the rest of the county, or how much was produced in smaller towns or the countryside.

However, we can look at the most urban and most rural areas and see if these contradict Varadkar’s claims.

Dublin, the most urbanised county, according to the CSO, has a total tax intake of €44.149 billion in 2024, or about €30,277 per person.

Leitrim, the most rural county according the recent CSO release, has a tax intake of €312 million, which works out at about €8,852 per person.

Irish financial figures are often criticised for being skewed by corporation tax takes. However, even removing these, Dublin still comes out on top, with €20,563 per person versus Leitrim’s €8,210.

Similar results were found across a smattering of other examples at the rural end of the scale. 

Nevertheless, the Dublin figure is significant on its own — it accounts for just under 47% of the total tax take in the country.

The next highest take, Co Cork, has a tax take of €26.5 billion. Counting both the city and the county, Cork is 63 percent urban, according to CSO definitions. This is almost exactly the same as the country as a whole.

As such, we can’t really assign Cork’s high tax take to an unusually high amount of either urban or rural workers.

What we can say is that the tax data is consistent with Varadkar’s claim.

At the very least, the population of Dublin, the most urban county, pays significantly above the Irish average relative to its population.

Expenses

But even if we take this tax data as definitive, it only tells half the story. It doesn’t matter if people in urban areas pay more taxes if those taxes never make it to the countryside. Do urbanites also get more support from the government?  

In response to The Journal’s queries, the Department of Public Expenditure said that total expenditure data was “not held on a geographical basis”, though “balanced regional development” was part of the National Development Plan, and information on individual projects above €20 million was available. 

Similarly, while there is significant data on expenditure available publicly, it does not tell us much about the urban/rural divide.

The government website Where Your Money Goes gives detailed breakdowns of how tax money is spent in Ireland.

It shows that in 2026, €28.9 billion will be spent in social protection, and another €27.4 billion in health. It does not, however, say where these will be spent geographically.

The social protection expenditure includes pensions, as well as illness, disability and carers payments. These are payments that go to urban and rural residents alike.

We can say that there is a higher proportion of working age people in cities, and cities have the highest levels of employment. However, social welfare is the majority of income in proportionally more families in independent towns than in rural areas.

Using county-level data from the CSO (dataset RAA02), we can see that when social benefits are in each county. Dublin’s benefits are slightly lower than the Irish average. 

When the figure for benefits is taken from the figure from from income tax, Dublin still contributes almost twice as much tax per person as the national average.

Taken social benefits into account gives us huge insight into how taxes are spent. A nearly €40 billion, they are a considerable chunk of government expenditure.

The only other similarly large expenditure category is health. And while that does have a geographic indication, it doesn’t help us much.

The data is broken up into six health regions, all with a mix of urban and rural areas.

A few allocations are more clear-cut.

It is probably safe to assume that most of the €193 million allocated toward Rural Development and Regional Affairs will go to rural areas.

However, these amounts are such a small proportion of the total spend that they tell us very little about the overall picture. For a large part, the geographic allocation of taxes are a black box. However, there is one more sliver of light.

Production data

A certain amount of information is also available on how business pay taxes and receive “subsidies”, in CSO releases (e.g. CIRGDP02). However, it gives this data these in terms of “NUTS3” regions — large areas with names like “Midland”, “Border” and “West”.

Except for the region “Dublin”, all of these areas could be said to be a mix of urban and rural, though the midland and border regions are the most rural.

The data set behind this release includes information on subsidies received in these regions.

According to the CSO, these are “payments by Government (or the European Union) to producers of goods and service” and include payments by the government on Dublin Bus, universities and colleges, as well as farm payments. In effect, they include a lot of services, so long as they also benefit businesses.

By dividing the subsidies by the population of the regions, we get an idea of where this money is proportionally allocated — or at least how Dublin compares to the rest of the country.

Dublin has slightly higher subsidies than the country on the whole — significantly more than the border region and the west. But it also shows that these subsidies are more than outweighed by the production taxes paid in the Dublin region, such as VAT or commercial rates.

The south-west region (Cork and Kerry) receive the most subsidies but, again, their taxes more than pay for these.

So, while Dublin does receive additional business subsidies (which in some cases translates into services), the county more than pays for it.

If we put all these datasets together, what do they show?

These are only slices of the economic situation, but the data indicates that business in urban areas pay more tax per population, and that, in Dublin at least, this is more than enough to offset subsidies they receive.

Most significantly, people in Dublin receive less benefits and pay much more tax on average.

However, we also know that much of government spending is not broken down into urban and rural categories.

The publicly available data is limited, but it all points toward one conclusion: urban areas pay disproportionately more than they receive.

But this area of study is not new in economics. So what do the experts in the field know that we do not?

Consensus

All the experts who spoke to The Journal said that it would be expected that urban areas, in effect, subsidise the services of rural areas. They also all said that this was a normal and, in ways, a good thing.

Edgar Morgenroth, a Professor of economics at DCU, told The Journal that it would be surprising if it wasn’t the case that urban areas supported rural ones.

Morgenroth used to calculate how much these transfers were worth, but stopped when the data he used on capital expenditure stopped being published.

His last publication on this was 2010, but he says data he has since observed is consistent with his earlier findings, and he has seen nothing to make him think that the situation had changed.

However, economists who spoke to The Journal all said that thinking in terms of urban and rural areas was the wrong way to talk about these transfers.

“Most economic activity happens in urban areas, and so they generate more economic activity,” said Cathal O’Donoghue, a Professor at the University of Galway who has done extensive research on Rural Development in Ireland.

“Because there is a gap in income, there is a gap in taxes and particularly so because of progressive taxation. The transfer is not specifically urban-rural, but more so between rich and poor.”

This also tallied with ESRI research, which observed a large gap between the lowest and highest earners, “probably as a result of the high concentration of tech and pharma workers, who tend to be located in urban areas,” Karina Doorley of the ESRI told The Journal.

“In the same way that tax and welfare redistributes between rich and poor, it redistributes between richer and poorer areas,” she said.

“The administrative county with the lowest average gross income in 2022 was Donegal, with average gross income 44% that of the richest county (Dun Laoghaire Rathdown).

“So, yes, urban (richer) areas subsidise rural (poorer) areas in Ireland (and many other countries) when we consider the direct tax and welfare system.”

Economists who spoke to The Journal also emphasised that these transfers of wealth may also be the best thing for the country overall. 

“While inequality has fallen over time in Ireland, there is a widening gap both in terms of economic output between urban and rural areas and in terms of household income,” Cathal O’Donoghue said.

“This widening gap comes at a cost. Although incomes are higher, costs and life stresses can be higher and well-being lower. In research we did, we found that the single largest negative factor associated with well-being was living in Dublin despite higher incomes.”

O’Donoghue also warned the “consequence of high inequality is stark”, and transfers from rich areas to poorer areas could alleviate this.

“This is our social contract in Ireland, where those who can afford to pay more, pay proportionally more,” O’Donoghue said. “Reducing the divide between rich and poor is a core value and promotes social cohesion and fairness.”

Morgenroth also criticised Varadkar’s comments for disregarding the significant contributions rural Ireland made toward the country’s coffers. While it was true that urban Ireland paid more, it was not true to say, as Varadkar did, that urban Ireland was “paying all the bills”.

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