Irish Covid support among world’s most generous – OECD report

A study has shown that Irish Covid supports were among the most generous in the developed world.

Actual disposable income in Irish households – after-tax income adjusted for inflation – rose to almost 8 per cent in 2020, the highest rate in a group of 31 (mostly European) countries surveyed by the Organization for Economic Co-operation and Development (OECD). .

The Paris-based OECD said the growth rate in 2020 was double the average over the four years to 2019.

Households in Lithuania, Canada, the US and Australia also saw significant income growth in 2020, although most fell back to the four-year average in 2021.

Irish dates for 2021 are not yet available.

Real incomes rose nearly 8 percent in Lithuania, over 7 percent in Canada, and almost 6 percent in the US and Australia.

“In some countries, such as Australia, Canada, Ireland, Lithuania and the United States, extraordinary government support, often in the form of remittances and other benefits, led to unusually large increases in real incomes in 2020,” the OECD said in its annual tax policy reform report on Wednesday.

“However, in most countries, government support coupled with restrictions on the consumption of some services also helped lift household saving rates to record highs, largely benefiting the affluent and higher-income households.”

The savings rate of Irish households hit 25 percent in 2020, according to the central bank, the highest annual increase in the 19-strong euro zone and more than double of previous years.

According to the Central Statistical Office, median disposable household income – the median between the highest and lowest incomes – increased by 5.2 percent to €46,471 in 2020.

But the CSO said it rose more sharply thanks to Covid support for the unemployed.

The at-risk-of-poverty rate was 11.6 percent in 2020, up from over 13 percent in 2019. Without Covid income support, the at-risk-of-poverty rate would have been 19.9 percent, according to the CSO.

The OECD report says tax reforms have helped governments shore up their economies during Covid.

But she has warned governments that capping energy prices – rather than channeling support to vulnerable consumers – will disproportionately benefit the rich and spur demand for fuel.

Energy tax breaks since October 2021 have cost governments $246 billion so far — $169 billion of which “in the form of support for fossil fuels,” according to the OECD.

Income support accounts for just a third (34 percent) of all government support, with most of it going to low-income households, the report found.

Price supports – which accounted for 66 percent of all measures – were almost entirely untargeted.

“Government responses have largely focused on price control – which tends to support rather than dampen demand,” the report said. “Large energy consumers, who often have higher incomes, can benefit disproportionately.”

Meanwhile, the report found that despite huge tax receipts during the pandemic, Irish tax revenues fell by 3.5 per cent of GDP, the largest drop in the 38-country OECD zone.

However, this was largely due to the reduced VAT rates in 2020 and the massive increase in exports and GDP growth in the multinational sector.

Ireland is one of 10 countries where taxes on income and corporate profits together accounted for at least 40 per cent of total tax revenue in 2020. The average in the OECD was 32.8 percent.

“Recent tax reforms aimed to boost economic recovery from Covid-19, while countries with the widest fiscal space granted more generous tax benefits for longer periods,” said Pascal Saint Amans, director of the OECD Center for Tax Policy and Administration.

“Countries have also used tax policy as one of their key tools to respond to the rapid rise in energy prices.” Irish Covid support among world’s most generous – OECD report

Fry Electronics Team

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