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Irish Pay Lowest Taxes In Europe, Says Deloitte

by Jason Gorringe,, London

20 December 2006

A new survey by Deloitte of employee remuneration in enterprises with 10 or more employees shows a wide divergence in average remuneration levels and social security costs in 24 of the 25 EU member states.

The survey highlights that a wide gap still exists in the remuneration levels of EU member states that joined in May 2004 and the original 15 members.

According to the survey, Lithuania has the lowest remuneration costs at just over EUR5,100. Estonia and Slovenia are not far behind with remuneration levels of EUR9,216 and EUR9,264. These figures represent a considerable increase over the figures for 2005 which were EUR7,466 and EUR8,321 respectively.

Ireland is ranked 15th out of the 24 countries surveyed, with an average remuneration cost of EUR36,852. In 2005 the figure was EUR34,997 – this represents an increase of 5.3%. Deloitte observed that a positive aspect of Budget 2006 is that for the second year in a row it has not added to the total cost of employment, while at the same time, it has reduced the total tax on the employee by EUR530.

However, the relative positions of the countries change when one compares the employee tax and insurance costs as a proportion of the total remuneration paid. Ireland continues to have the lowest level at 6.34% post-Budget, with Cyprus in second place at 8.77%. This confirms Ireland as a low tax jurisdiction for employees.

Also, when one compares the employer social insurance costs as a percentage of remuneration, Ireland is in fifth position. Denmark has the lowest percentage at 1.36%. Ireland, at 9.71%, is just behind Cyprus, Malta and the UK which have percentages of approximately 9.1%.

Comparing the combined costs of tax and employee and employer social insurance costs with the total cost of employment, Ireland post-Budget is found to have the lowest percentage cost. This was only a marginal advantage in 2005, but the gap between Ireland and Cyprus has increased to 1.44%. Malta and Luxembourg continue to occupy third and fourth places respectively.

Commenting on the results of the survey, Pat Cullen, tax partner with Deloitte, stated that:

“The survey shows the continued commitment of the Irish Government to keep the tax and social welfare costs down and hence keep the costs of employment down. However, Ireland continues to be exposed to pressures from eastern Europe where employment costs are still relatively low. As those economies gather pace and start to compete more effectively for international mobile investment, Ireland will be at a considerable disadvantage.”

He added: “While it is unrealistic to expect Ireland to be able to close the gap in remuneration levels, the challenge for Ireland Inc is to effectively promote the added value that Ireland has to offer through its location, other taxation measures and experienced workforce so that it continues to attract sustainable investment to ensure its economic growth.”

A comprehensive report in our Intelligence Report series giving background tax and residence information on many of the key offshore jurisdictions is available in the Lowtax Library at and a description of the report can be seen at

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