Structure and development of tax revenues At 28.2 % in 2010, the total tax-to-GDP ratio in Ireland (including social security contributions) is the fifth lowest in the Union and the second lowest in the euro area. While this ratio has shown an upward trend from 2002 to 2006, it decreased by almost four percentage points from 2006 to 2009 and remained stable in 2010. Over the same period, the cyclically adjusted ratio has not changed significantly. One can therefore attribute the variation in the unadjusted ratio to the strong effects of the recent crisis. The taxation structure is characterised by a strong reliance on taxes rather than social security contributions. Indirect and direct taxation make up 41.4 % and 37.9 % of the total revenue in 2010 respectively, whereas the social security contributions raise only 20.7 % of total tax revenue. However, the share of the latter increased by almost 6 percentage points since 2006. Despite this increase, the structure of taxation differs considerably from the typical structure of the EU-27, where each item contributes roughly a third of the total. As in the majority of Member States, the largest share of indirect taxes is constituted by VAT receipts, which provide 55.3 % of total indirect taxes (56.9 % for the EU-27). The structure of direct taxation is similar to that found in the EU-27. The shares of personal income taxes and corporate income taxes are in line with the EU-27 average and represent 7.6 % and 2.6 % of GDP. Social security contributions represent a meagre 5.8 % of GDP (second lowest in the Union after Denmark), compared to an EU-27 average of 10.9 %. Employers' and employees' contributions are at 3.2 % and 2.5 % of GDP, respectively. Ireland is one of the most fiscally centralised countries in Europe; local government has only low revenues (3.4 % of tax revenues). The social security fund receives just 15.2 % of tax revenues (EU-27 29.9 %), while the vast majority (80.4 %) of tax revenue accrues to central government. This ratio is exceeded only by Malta and the United Kingdom. From 1999 to 2002, Ireland reduced the total tax burden across the board from 31.5 % to just 28.3 % of GDP. Since 2002, however, the total tax ratio has increased every year, reaching 32.0 % in 2006, in large part due to a surge in VAT receipts, capital gains tax and stamp duties. This upward trend was interrupted in 2007 when the total tax ratio decreased by almost one percentage point. In 2009, total tax revenue to GDP reached the lowest value and remained at the same level in 2010. This decrease was mainly driven by lower ratios of VAT, PIT, other taxes on products (incl. import duties), and corporate income taxes to GDP, caused by the worsening economic situation in Ireland. Taxation of consumption, labour and capital; environmental taxation The tax structure by economic function (consumption 35.5 %, labour 41.4 %, capital 23.1 %) differs notably from the EU-27 average (34.4 %, 47.3 %, 18.4 %), with the tax system deriving one of the smallest proportion of tax receipts from labour of any EU country. Conversely, it raises a large proportion from capital taxes. However, compared to 2006 the share of labour has increased by almost nine percentage points while the capital share decreased by more than eight percentage points over the same period. Possible reasons for this could be profits reacting much stronger to the economic crisis compared to employment, the introduction in 2009 of a pension levy on public sector wages and the two step increase in the employees' social security contributions ceiling. In addition, revenue from housing related transfer taxes fell substantially after the slump of the housing market from 2007 onwards. Taxes on consumption in relation to GDP are at 10.0 % (EU-27 11.9 %). After a declining period from 12.8 % in 1995 to 10.8 % in 2003, this ratio increased slightly to 11.4 % in 2006. This principally reflects buoyant economic activity in that period, which has driven VAT receipts up. However, the value decreased in response to the economic crisis and is now at 10.0 %. The weight of indirect taxes other than VAT and excise duties is also high by EU standards.