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From Joint to Individual: The Distributional and Labour Supply Effect of Tax Individualisation in Ireland

Author

Listed:
  • Doorley, Karina

    (Economic and Social Research Institute, Dublin)

  • Simon, Agathe

    (ESRI, Dublin)

  • Tuda, Dora

    (ESRI, Dublin)

Abstract

This paper evaluates the redistributive and labour supply effects of transitioning from a joint to a fully individualised income tax system in Ireland. The current Irish tax system, which remains partially joint since the early 2000’s, provides a financial advantage to married couples by allowing them to to share tax bands and credits. However, it also creates a financial disincentive for secondary earners (who are typically women) to work. Using the microsimulation model, SWITCH, we estimate the distributional effect of moving to a fully individualised tax system in Ireland. We find that this would result in income losses, which increase with the level of income. Linking SWITCH to a discrete choice labour supply model, we then estimate the behavioural response of married couples to a fully individualised tax regime. We find that a shift to individualised taxation would result in increased labour supply of married women, and a reduction in the hours worked by married men due to intra-household labour substitution effects. We explore the implications of this for a range of outcomes linked to womens’ financial independence.

Suggested Citation

  • Doorley, Karina & Simon, Agathe & Tuda, Dora, 2025. "From Joint to Individual: The Distributional and Labour Supply Effect of Tax Individualisation in Ireland," IZA Discussion Papers 18035, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp18035
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    References listed on IDEAS

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    1. Tom Kornstad & Thor Thoresen, 2007. "A discrete choice model for labor supply and childcare," Journal of Population Economics, Springer;European Society for Population Economics, vol. 20(4), pages 781-803, October.
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    3. Susan Himmelweit, 2002. "Making Visible the Hidden Economy: The Case for Gender-Impact Analysis of Economic Policy," Feminist Economics, Taylor & Francis Journals, vol. 8(1), pages 49-70.
    4. Tim Callan & Arthur Van Soest & John R. Walsh, 2009. "Tax Structure and Female Labour Supply: Evidence from Ireland," LABOUR, CEIS, vol. 23(1), pages 1-35, March.
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    Keywords

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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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