The 2018 Abrivia salary survey found that 45% of employers said that the marginal tax rate in Ireland was making it difficult to attract overseas staff. This figure is down from 50% in 2017.
1. What is the marginal tax rate in Ireland?
For individually assessed employees earning between €19,373 and €70,044 the marginal tax rate (USC, income tax and PRSI) is 48.75% (source KPMG). For incomes above €70,044 the marginal tax rate for employees is 52%.
2. How does this compare to the rest of Europe?
The marginal tax rate for single taxpayers in Germany for salaries between €54,053 and €256,304 is 42%. In the Netherlands, annual income above €68,507 is charged at a rate of 52%. In Finland, if you earn more than €127,000 the tax rate is a whopping 65%, whilst Italy is a mere 43% for salaries over €75,000. Our nearest neighbour (the UK) has a rate of 40% for high earners and for really high earners (over £150,00) this rate increase to 45%. However, the higher rate in Scotland is a single percentage higher, at 46%.
3. How do salaries in Ireland compare to the rest of Europe?
Ireland is among the top ties of wealthy countries in EU and is in the top 25 wealthy countries globally when comparing the GDP per capita measure. The Irish Times reported recently that Ireland is ranked as one of the best in Europe in regards salaries, behind Switzerland Norway and Denmark. Ireland is also ranked second in Europe in regards purchasing party when compared with the rest of Europe.
Despite paying a relatively high marginal tax rate in Ireland this is somewhat negated by higher salaries and more purchasing power when compared to most of the rest of Europe. Hence, it makes sense that the marginal tax rate is of diminishing importance for employers trying to attract overseas talent as the salaries on offer are usually much bigger than those in their respective home countries.