Tax burdens on labour income in OECD countries continue to rise
26 March 2013
Posted by: Herman van Dyk
By Organisation for Economic Co-operation and Development (OECD)
data show that across OECD countries the average tax and social
security burden on employment incomes increased by 0.1 of a percentage
point to 35.6 per cent in 2012. It increased in 19 out of 34 countries,
fell in 14, and remained unchanged in 1.
were largest in the Netherlands, Poland and the Slovak Republic (mainly
due to increased rates and other changes to employer social security
contribution) as well as Spain and Australia (due to higher statutory
income tax rates).
This follows substantial increases in
2011. Since 2010, the tax burden has increased in 26 OECD countries and
fallen in 7, partially reversing the reductions between 2007 and 2010.
the past two years, income tax burdens have risen in 23 out of 34
countries, largely because a higher proportion of earnings was subject
to tax as the value of tax free allowances and tax credits fell relative
to earnings. In 2012, only 6 countries had higher statutory income tax
rates for workers on average earnings than in 2010.
This dataset will be available in Taxing Wages 2013
(to be published on 10 May 2013). The report provides details about the
taxation of employment incomes and the associated costs to employers
for different household types and at different earnings levels on an
internationally comparable basis – key factors in whether individuals
seek employment and businesses hire workers.
burden is measured by the ‘tax wedge as a percentage of total labour
costs’ – or the total taxes paid by employees and employers, minus
family benefits received, divided by the total labour costs of the
employer. Taxing Wages
also breaks down the tax burden between personal income taxes (PIT),
including tax credits, and employee and employer Social Security
Key Taxing Wages results in 2012 included:
highest average tax burdens for childless single workers earning the
average wage in their country were observed in Belgium (56.0%), France
(50.2%), Germany (49.7%) and Hungary (49.4%). The lowest were in Chile
(7%), New Zealand (16.4%) and Mexico (19.0%). (See table 1 in excel).
average tax burden for those earning the average wage increased by a
0.5 percentage point rise in 2011 and 0.1 percentage points in 2012 to
reach 35.6 per cent. This followed a decline from 36.1 to 35.0 per cent
between 2007 and 2010. (See table 2 in excel).
main contributors to the 2012 increase in the average OECD total tax
wedge were changes to employer social security contributions, with
increases in the contribution rate in 8 OECD countries, most notably
Poland (+1.2 percentage points), the Slovak Republic (+0.8) and the
- In 13 of the 19 countries
with an increased tax wedge in 2012, the PIT wedge also rose. The tax
burden increases in Spain (+1.4 percentage points) and Australia (+0.6)
were respectively due to higher income tax rates and the introduction of
a temporary additional levy to finance post-cyclone reconstruction.
Changes to PIT were the primary factor in where the tax burden fell -
the largest decrease was in Portugal (-1.3 percentage points) where
there was a reduction in the surtax rate.
highest tax wedges for one-earner/two children families at the average
wage were in France (43.1%), Greece (43.0%), Belgium (41.4%) and Italy
(38.3%). New Zealand had the smallest tax wedge for these families
(0.6%), followed by Ireland (6.4%), Chile (7%), and Switzerland (9.5%).
The average for OECD countries was 26.1%. (See table 3 in excel).
to the abolition of tax allowances for dependent children, Japan saw
the largest increase in the tax burden for one earner families with
children (+2.4 percentage points) compared with a 0.3 percentage points
increase for the single average workers.
- In all OECD
countries except Mexico and Chile, the tax wedge for families with
children is lower than that for single individuals without children.
The differences are particularly large in the Czech Republic,
Luxembourg, Germany, Hungary, Ireland, New Zealand and Slovenia.
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