Individual Tax Burdens Continued To Rise In 2014
Taxes on wages have risen by about one percent for the average worker in OECD countries between 2010 and 2014, even though the majority of governments did not increase statutory income tax rates, according to the Organisation for Economic Cooperation and Development’s (OECD’s) Taxing Wages 2015 report.
According to the report, the tax burden has increased in 23 OECD countries and fallen in 10 during this period. Most of the increased tax resulted from wages rising faster than tax allowances and credits. In 2014, only seven countries had higher statutory income tax rates for workers on average earnings than in 2010, and in six countries they were lower.
In 2014, the tax burden on the average worker across the OECD increased by 0.1 percent to 36 percent, even though no OECD country increased its statutory income tax rates on the average worker. The tax burden increased in 23 of the 34 OECD countries, fell in nine, and remained unchanged in two.
Taxing Wages 2015 provides cross-country comparative data on income tax paid by employees as well as the associated social security contributions made by employees and employers. The tax and social security contribution burden is measured by the “tax wedge” – the total taxes paid by employees and employers, minus family benefits received as a percentage of the total labour costs of the employer.
This year’s report contains a special chapter on labour income in five major non-OECD economies: Brazil, China, India, Indonesia, and South Africa. The analysis shows that there is significant variation between these countries. In 2013, tax wedges in Brazil and China for the average single worker were similar to those observed in many OECD countries. In contrast, employees in India, Indonesia, and South Africa faced tax wedges that were much lower than in the vast majority of OECD economies.
The highest average tax burdens for childless single workers earning the average wage in their country were observed in Belgium (55.6 percent), Austria (49.4 percent), Germany (49.3 percent), and Hungary (49 percent). The lowest were in Chile (7 percent), New Zealand (17.2 percent), Mexico (19.5 percent), and Israel (20.5 percent).
The highest tax wedges for one-earner families with two children at the average wage were in Greece (43.4 percent), Belgium (40.6 percent), and France (40.5 percent). New Zealand had the smallest tax wedge for these families (3.8 percent), followed by Chile (7 percent), Switzerland (9.8 percent) and Ireland (9.9 percent). The average for OECD countries was 26.9 percent.
Due to reduced family income supplement and frozen basic family benefit payments, Ireland saw the largest increase in the tax burden for one earner families with children (+1.5 percent) compared with a 1.1 percent increase for the single average worker.
In all OECD countries except Chile, Greece, and Mexico, the tax wedge for workers with children is lower than that for single workers without children. The differences are particularly large in the Czech Republic, Germany, Ireland, Luxembourg, and Slovenia.