Too often considerations of the taxation system are focused on income taxes, or income related taxes like social insurance; a narrow perspective given the composition of taxation revenue collected. Projections for the Republic of Ireland’s taxation revenue suggest that just over €50 billion will be collected across all taxation categories during 2014. While corporations and other businesses contribute a sizeable proportion of this sum (principally through profit taxes, local authority charges and employer social insurance) the largest proportion flows from households.
Households contribute to financing the state in a number of ways. Household’s direct tax contributions from earnings, through income taxes and social insurance, are apparent; albeit that we tend to have greater knowledge of benchmark taxation rates (both effective and marginal) than the actual rates households pay taking account of various tax expenditures. Household indirect taxation contributions, through consumption taxes (VAT, excise duties), levies, local taxes and charges, are less apparent.
Using data from the most recent Household Budget Survey, this paper estimates both the direct and indirect taxation contributions of households. The paper examines, individually and collectively, the direct and indirect tax paid by households across the income deciles, alongside the overall average household contributions. The data is presented at the households and equivalised adult level.
In establishing these estimates, the paper aims to provide a more comprehensive understanding of the distribution and composition of household tax contributions. Given this evidence, the paper also considers the distributive implications of two recent VAT reforms.