AVERAGE FAMILIES HAVE seen their disposable income drop by over €300 per month and the amount of tax they pay double in the last five years, according to a study released today by Grant Thornton.
The research analyses the the impact of austerity on taxpayers — including the introduction of new taxes like the universal social charge and local property tax, and the reduction in child benefit.
According to the acountancy firm, a family with one parent earning €40,000 has seen its tax bill increase by 125 per cent and experienced at €300 per month decline in disposable income. A couple in which both parents earn €40,000, with two children and a house valued at €200,000, have seen their tax bill rise by 54 per cent and a monthly disposable income drop of €511.
The introduction of the universal social charge in 2011 has been the main driver of the increased tax bills. The reduction in child benefit for the first and second child from €166 per child in 2008 to the current level of €130 has further compounded the impact on disposable income from higher tax rates, resulting in the loss of a further €864 per year for a family with two children.
“Whilst five years of austerity was necessary to restore economic stability, it’s clear low to middle income earners have paid a heavier price in terms of the percentage increase in taxes they pay,” Grant Thornton Partner Peter Vale said.
“With disposable income sucked out of the economy to shore up the government finances it is no surprise that consumer spending remains weak and the strength of any economic recovery uncertain.”
In terms of specific tax measures in the upcoming Budget, the accountancy firm says we can expect an increase in PRSI for the self employed, a reduction in tax tax relief for pension contributions and increases in excise duties.
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