The profound influence of foreign investment on Ireland’s corporate tax income is under scrutiny once more as the budget approaches. Contrary to the common belief that this is a side-effect of the global tax landscape and could vanish instantly, fresh evidence highlights that the surge in economic growth stemming from this investment boom is results in a substantial growth in the population earning higher wages. Quietly, Ireland is evolving into a more affluent society.
Each year pre-budget, the Revenue Commissioners present a summary document detailing the implications of tax amendments and providing an estimate of individuals in varying income brackets. The latest released predictions for 2025 offer an insight into the current situation.
The data from Revenue pertains to “tax units”, which encapsulates single earners as well as jointly assessed couples. While this may not perfectly portray household income, it does offer an accurate representation of earning trends.
As a flashback to the pre-pandemic time in 2018 shows, approximately 177,000 taxpayers, inclusive of jointly assessed couples, made over €100,000 gross. In the following year, this figure is set to soar to nearly 400,000 – a little over 11% of all income earners. This signifies over double the amount in this wage category in a seven-year span and a 10% increase from the predicted figure for 2024.
It seems, then, that the scenario of Irish households earning beyond €100,000 is getting more common. However, this sharp rise doesn’t necessarily suggest a significant improvement in financial conditions owing to factors such as inflation pushing people into higher income brackets without a corresponding improvement in their economic well-being. Nonetheless, the drastic increase in higher-income earners is noteworthy.
To purchase an average-priced house in Dublin, a family would need an income nearing €110,000 – a threshold that a notable number of people have now begun to meet.
Surveying the upper sections of the income hierarchy, one can observe that over 165,000 out of 400,000 currently pull in above €150,000, constituting about 5% of all income recipients. This is a notable increase from 67,000 in 2018, who made up only 2.5% of all wage earners. Additionally, around 87,000 people reported a yearly income exceeding €200,000, a figure that stood at 35,000 in 2018. There are a rising number of wealthy households in Ireland, making over €300,000, with lifestyles that reflect this affluence.
It’s worth pointing out that not all these high-paying jobs are with multinational companies. However, it’s reasonable to hypothesize that the surge in foreign investment since 2015 has played a significant role. Davy’s research, grounded in Central Statistics Office information, demonstrates that multinational corporations’ cumulative monetary input through wages and corporate tax has tripled since 2013, hitting around €67 billion last year, with approximately €47 billion of this being wages. These are the positions that are luring overseas workers to Ireland, contributing to high immigration rates revealed in this week’s CSO population report. Furthermore, these companies’ expenditures are fostering thousands of jobs throughout the economy, boosting local businesses through increased spending.
The growth of higher wage earners gives us useful insight into the dynamics of the Irish economy, which on a fundamental level, portrays a positive story. It also gives some assurances about the broader paybacks of the reported economic growth in Ireland over the past few years, which some have derided as merely fictitious financial reports. While multinational tax strategies might distort some of our data, the significant increase in employment – an additional 750,000 in the last decade – narrates its own tale. The data displaying an expansion in higher wage earning brackets further contributes to this narrative.
However, the data does suggest that the chasm between the haves and the have-nots in Ireland in terms of gross income remains considerable – perhaps even enlarging. Yet, there is a flip side to the coin. The higher income bracket shoulders a significant chunk of the income tax and USC burden; next year, individuals earning more than €100,000 are expected to net just over 40 per cent of the total income, but cover close to two-thirds of all individual tax.
The fundamental issue is how to leverage these assets to firstly, aid those without employment and lower earners, and secondly, alleviate the burden on the hard-pressed middle class who battle with the undoubtedly elevated cost of living in Ireland. Thirdly, it necessitates addressing the notable gaps in infrastructure and services that the State is currently dealing with.
The increasing influx of high earners accounts significantly for the state of affairs in the housing market. There are a sufficient number of people, in other terms, possessing enough income to afford the prevailing market prices. This results in the middle earners finding themselves outpriced. For an average-priced home in Dublin, a family income nearing €110,000 is required – there are enough in this bracket to meet it, as well as enough higher earners to contest for the pricier homes.
This forms part of a broader narrative. The dual economy, characterised by high earners primarily profiting from the multinational sector and domestically employed workers with fairer wages, presents its own challenges. It feeds into an economic environment and elevated costs, causing domestic firms and their workforce to sometimes struggle to maintain pace. It leaves the middle class – which includes many of the approximate 800,000 tax units earning €50,000-€100,000 – feeling squeezed, and lower earners feeling like outcasts.
Nonetheless, there are broader positive economic offshoots too and it results in the generation of significant resources for the government purse. As the budget season approaches, the habitual warnings pertaining to the overreliance of tax revenues on the activities of a handful of large corporations will resurface. And they should be heeded. However, we also need to acknowledge that Ireland’s economic and earning foundations have undergone a dramatic transformation. Indeed, the Irish economy is susceptible to the decisions of multinationals – such as US enterprise Cardinal Health, which recently declared its decision to shut down a plant in Tullamore.
However, the economic boom fuelled by multinationals is genuine, notwithstanding its tax-driven excesses. We may have devoted excessive worry over the past few years about this vanishing suddenly. Instead, what is needed is more thought and effort into utilising the extraordinary resources amassed for the State in a calculated manner to fundamentally transform the standards of housing, infrastructure and services accessible to the general populace.