The latest Taxing Wages report from the OECD shows that the tax wedge for the average single worker in Ireland increased by 0.3 percentage points from 33.7% in 2020 to 34.0% in 2021.
In 2021, Ireland had the 24th lowest tax wedge among the 38 OECD member countries, occupying the same position in 2020. The tax wedge is a measure of the tax on labour income, which includes the tax paid by both the employee and the employer.
Ireland had the 32nd lowest tax wedge in the OECD for an average married worker with two children at 19.0% in 2021. Child-related benefits and tax provisions tend to reduce the tax wedge for workers with children.
The employee net average tax rate is a measure of the net tax on labour income paid directly by the employee. In Ireland, the average single worker faced a net average tax rate of 26.7% in 2021. In other words, in Ireland the take-home pay of an average single worker, after tax and benefits, was 73.3% of their gross wage, compared with the OECD average of 75.4%.
Considering child-related benefits and tax provisions, the employee net average tax rate for an average married worker with two children in Ireland was 10.1% in 2021, which is the 28th lowest in the OECD, and compares with 13.1% for the OECD average.
This means that an average married worker with two children in Ireland had a take-home pay, after tax and family benefits, of 89.9% of their gross wage, compared to 86.9% for the OECD average.
Ireland was one of only eight countries where real wage levels fell last year, according to the report.