Ireland’s tax system is most progressive of any advanced economy, report finds

Ireland has the most progressive tax system of any advanced economy, according to the Department of Finance.
In a report, entitled Beyond GDP – Quality of Life Assessment, the department said the State’s taxation and welfare system does more to reduce income inequality than any other OECD (Organisation for Economic Co-operation and Development) economy. It also noted that the system has become “more progressive over time”.
A progressive tax system is one in which the burden of tax increases in line with higher income levels.
While market income inequality – income before taxes and benefits are applied – in Ireland is high, the report highlighted how this level of inequality is significantly reduced when the tax and welfare system takes effect.
The department’s report cited OECD data which show that Ireland has the largest reduction in the Gini coefficient, a measure of inequality, between market and disposable income for the working age population, and fourth largest for the total population.
The report also noted that wealth inequality in Ireland has declined over time, “reflecting rising assets for those in the middle of the wealth distribution and falling liabilities for those at the bottom of the wealth distribution”.
The Department of Finance’s also assessed the impact of Budget 2025 on household income.
It concluded that the core measures, which included income tax changes and hikes in welfare rates, would increase the weekly disposable income of the average household by 2.3 per cent while the one-off cost-of-living package resulted in average gains of 1.3 per cent.
It also noted that welfare measures funded from ring-fenced carbon tax revenues offset the regressive impact of the carbon tax rise in the budget, “particularly for the first three income deciles”.
“Overall, the distributional impact of Budget 2025 and the cost of living package is progressive,” it said.
“The impact is progressive with those on lower incomes benefiting proportionally the most. In terms of household types, lone parents and single retirement age households fare best,” it concluded.