Direct tax: paid by the person who bears it
Updated: July 2026
A direct tax is charged on the person who is meant to bear it: you earn the income, you owe the tax, and nobody stands between you and Revenue. That is the whole distinction from indirect taxes like VAT, where a business collects from you and remits on your behalf. Simple to state, and it drives real differences in how the taxes feel and behave.
Ireland's direct taxes
- Income tax: 20% and 40% bands, the state's largest revenue source, collected from employees through PAYE and from the self-employed through self-assessment.
- USC: the Universal Social Charge, a separate levy on gross income with its own bands, born in the 2011 crisis and never quite leaving.
- PRSI: social insurance on earnings, buying entitlement to pensions and benefits.
- Corporation tax: 12.5% on trading profits, with a 15% effective minimum for very large groups since Ireland adopted the OECD Pillar Two rules. The rate's fame is its own story, told on the tax haven debate page.
- Capital gains tax at 33% on disposals, capital acquisitions tax at 33% on gifts and inheritances above thresholds, and local property tax on residential property values.
How direct and indirect behave differently
Direct taxes can be shaped to the person: credits, bands, age exemptions and means tests all attach to an identifiable taxpayer, which is how progressivity is engineered. They are also visible, itemised on every payslip, which is why they are politically hot in a way VAT rarely is. Indirect taxes are the mirror image: blind to who is buying, invisible inside prices, cheap to collect and steady through downturns. Every real tax system, including Ireland's, runs both and argues perpetually about the mix.
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Common questions
What is a direct tax in simple terms?
A tax paid straight to the state by the person or company that bears it, with no intermediary. Income tax on your salary is direct; the VAT in your supermarket bill, collected by the shop, is indirect.
What are Ireland's main direct taxes?
Income tax, USC and PRSI on earnings; corporation tax on company profits; capital gains tax on disposals; capital acquisitions tax on gifts and inheritances; and local property tax on homes.
Is USC a separate tax from income tax?
Yes. USC is charged on gross income with its own rates and bands, alongside income tax rather than as part of it. It was introduced in 2011 during the financial crisis.