Sunday, July 10, 2011

10/07/2011: Irish Tax Rates in International Perspective

Some interesting international comparisons for tax revenues across the EU27, plus Israel, Norway and Switzerland (no Iceland, sadly), courtesy of the OECD dataset - last updated April 27, 2011. I added Ireland's tax ratios relative to GNP based on CSO data for all the years 1999-2009.

Let's run some comparisons:
  • In 1999, total tax revenues in Ireland were 33.2% of GDP and 38.9 GNP which compares to 37.% of GDP for the simple average of 30 countries in the sample and 37.2 median. There was a slight (0.3) skew in the data. With a standard deviation of 7.0 that year, Irish tax/GNP ratio was well within the average, which is confirmed by the rank attained by Ireland as 12th highest tax economy in the group.
  • In 2003, total tax revenues in Ireland were 30.3% of GDP, which of course would be consistent with FF/PDs 'low tax' policies the Left is keen of accusing them of. Alas same year total tax revenue in Ireland stood at 35.9% GNP which compares to 36.7% of GDP for the simple average of 30 countries in the sample and 36 median. So as Irish tax revenue as a share of economy declined, so did the sample average. The new skew was 0.2 lower than in 1999. Hence, with a standard deviation of 6.5 that year, Irish tax/GNP ratio was again well within the average - actually even closer to the average - which is confirmed by the rank attained by Ireland as 16th highest tax economy in the group.
  • Now, note that within both of the above years, in terms of GDP comparative, Irish taxes were ranked 22nd and 26th highest in the sample.
  • Zoom on to 2007 when Irish tax revenues accounted for 32.0% of GDP and 38.8% of GNP against the sample average of 38% of GDP and a standard deviation of 5.8. There was zero skewness that year. Once again, there was no statistical difference between Irish tax rates and the average. Ireland ranked 25th highest tax economy in comparison against GDP and 14th in comparison to GNP.
  • 2009 is the latest year we have comparatives for and in that year, Irish Government tax revenue accounted for 29.6% of GDP and 35.9% of GNP, which (GNP figure) again was statistically indistinguishable from the mean which was 36.7% (with standard deviation of 6.1 and skew of 0.2).
So now, let's map the above data:
Notice the following features of the above chart:
  • Irish tax returns as a function GDP are more volatile than in terms of GNP - in fact historical standard deviation for Irish tax revenues in terms of GDP is 1.406 against that for GNP of 1.210. The median standard deviation for the sample of 30 countries is 0.736.
  • Irish tax returns as a function of GDP are always statistically significantly different from the average, but our tax returns as a function of GNP are never once outside the average. In other words, folks, our tax burdens are average. Not low, not high - average.
  • Only within the period of 2001-2003 did our tax returns as measured in relation to GNP fall statistically significantly below those for Euro area (EA17).
Let's put our tax revenues against some comparable countries. I divided the following two charts into Small Open Economies that are members of the Euro area and those that are not:
Interestingly, for the Euro are countries, Sweden, Belgium, Austria and Finland have tax burdens in excess of the average (note they are above the 1/2 STDEV band relating to the mean. Notice that all of the countries in that group, with exception of debt-ridden Belgium, are experiencing declines in their tax burden since 1999. Apparently, to the chagrin of our friends in the Trade Unions, Tasc and Irish Times - the ones so keen on shouting about the FF/PD coalition tax policies - the Nordics too were run by right-wing free-marketeers.

Next, notice the countries within the trace band around the mean - these are the Netherlands, Lux, Slovenia, Ireland (GNP), Portugal and Czech. Greece has dropped below the average range around 2004. It's an interesting neighborhood we are in, which includes highly aggressive tax competitor such as the Netherlands.

Lastly, we have a truly aggressively competitive Slovakia.

So again, there is no evidence in sight that Ireland is or was a low tax haven.

Now, for non-Euro countries:
Speaks for itself, but let me cover one little point. Switzerland has ranked within lowest 5 tax economies in 10 out of 11 years between 1999 and 2009. The country with functional public services and great public infrastructure has managed its affairs on the average tax revenues of just 29.3% of its GDP against the average of 31.7% of GDP and 37.5% of GNP for Ireland. So, really, folks, cut this crap about 'low taxes have ruined Irish economy/society'. The Swiss do it on less than us, better than us and achieve great social cohesion, civility and cultural development while using three languages where we can't master two. It's not in how much you spend, it's how you spend it.
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