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Ireland's tax system does 'the most in Europe to reduce inequality', says ESRI

The top 10% of households earn more than 2.6 times that of the middle household in 2017

Image: Shutterstock/takkun

A NEW REPORT from the Economic and Social Research Institute (ESRI) has found that no other tax system in Europe does more to reduce household income inequality than Ireland’s.

The report stated that while the distribution of household income in Ireland is the most unequal in the EU before taxes and benefits the study found that Ireland’s “highly progressive tax system substantially offsets this”. It said that this brings inequality in take-home pay very close to the EU average.

ESRI economist and author of the study, Dr Barra Roantree, described how before taxes, inequality in Irish household income is much higher than the EU average.

He explained: “Our tax system does more to reduce this than any other country in Europe. Two particularly progressive features of our tax system are the broad-based Universal Social Charge and the early level that the higher-rate of income tax kicks in. Together, these bring the level of inequality in take-home income very close to the EU average.”

The ESRI said the analysis was conducted by drawing on data collected by  the Central Statistics Office (CSO) and other European statistical agencies between 1987 and 2017.

Other findings from the report found that inequality in income before taxes and benefits has increased over the last 30 years, leaving the top 10% of households earning more than 2.6 times that of the middle household in 2017.

The report also described how inequality in household take-home pay has declined. It said that this is “largely because growth was particularly strong for lower-income households between 1997 and 2007, when incomes for the bottom fifth of households rose by an average of more than 12% per year in real terms”.

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