International economic “league tables ” need to be treated with caution – much of their contents are inevitably subjective. But a recent ranking of international tax regimes by a US-based think tank – the Tax Foundation – was striking in putting Ireland as the 31st of the 38 countries measured in terms of what it called “tax competitiveness”.
The main reason for Ireland’s low ranking was the income tax system. The foundation is coming from a particular place ideologically, favouring low and simple tax systems which it argues are economically efficient and promote economic growth.
But its findings are worth examining as they throw interesting light on tax in Ireland at a time when the tax burden is on the rise.
The background
Tax systems are judged on various criteria: Adam Smith’s goals in the Wealth of Nations (1776) are often quoted – fairness, certainty, efficiency and convenience. Ireland’s system is generally seen to score highly on one aspect of fairness, in that it collects a lot more income from higher income people, with some of this cash redistributed via welfare payments.
Using Organisation for Economic Co-operation and Development (OECD) data, the Department of Finance has said that the Irish tax and welfare system does more to reduce income inequality than any other industrialised countr
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